SILVERSTAR HOLDINGS LTD - 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

~~|X|~~ x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, ~~2006~~2008

~~|_|~~ o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________to ______________

Commission File Number 0-27494

SILVERSTAR HOLDINGS, LTD. (Exact name of Registrant as Specified in Its Charter)
Bermuda	Not Applicable
(State or Other Jurisdiction of Incorporation or Organization)	(IRS Employer Identification No.)
Clarendon House, Church Street, Hamilton HM CX, Bermuda (Address of Principal Executive Offices with Zip Code)
Registrant’s Telephone Number, Including Area Code: 809-295-1422
_____________________________________________________________________ Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report.
N/A Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ~~|X|~~x No ~~|_|~~ o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer or a smaller reporting company. See ~~definition~~definitions of “large accelerated filer,” “accelerated filer” and ~~large~~“smaller ~~accelerated~~reporting ~~filer~~company” in Rule 12b-2 of the Exchange Act. ~~Check one: Large accelerated filer | | Accelerated filer | | Non-accelerated filer |X|~~

~~Indicate by~~Large ~~check~~accelerated ~~mark~~filer ~~whether~~o ~~the~~Accelerated ~~registrant~~filer iso aNon-accelerated ~~shell~~filer ~~company~~o (asDo ~~defined~~not incheck ~~Rule 12b-2~~if ofa ~~the~~smaller ~~Exchange~~reporting ~~Act~~company). ~~Yes~~Smaller |reporting |company ~~No |X|~~x

~~APPLICABLE ONLY~~Indicate TOby ~~ISSUERS~~check ~~INVOLVED~~mark INwhether ~~BANKRUPTCY~~the ~~PROCEEDINGS~~registrant ~~DURING~~is ~~THE~~a ~~PRECEDING~~shell ~~FIVE YEARS:~~company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

~~Indicate by~~As ~~check~~of ~~mark~~February ~~whether~~9, ~~the~~2009, ~~registrant~~there ~~has~~were ~~filed all documents and reports required to be filed by Section 12~~20,197,911 13shares ~~or 15(d)~~ of the ~~Securities~~Registrant’s ~~Exchange Act of~~common ~~1934~~stock ~~subsequent to the distribution of securities under a plan confirmed by a court~~outstanding. ~~Yes |_| No |_|~~

~~APPLICABLE ONLY~~SILVERSTAR TOHOLDINGS ~~CORPORATE~~LTD ~~ISSUERS:~~- 10-Q

Title of Class	Shares Outstanding on February 9, 2007
Class A Common Stock	9,352,577
Class B Common Stock	814,786
Total	10,167,363

PART I – FINANCIAL INFORMATION

PART I - FINANCIAL INFORMATION

Item 1	Financial Statements

	Condensed Consolidated Balance Sheets at December 31, 2008 (Unaudited) and June 30, 2008	1

	Condensed Consolidated Statements of Operations (Unaudited) for the three months ended December 31 , 2008 and 2007	2

	Condensed Consolidated Statements of Operations (Unaudited) for the six months ended December 31 , 2008 and 2007	3

	Condensed Consolidated Statements of Cash Flows (Unaudited) for six months ended December 31, 2008 and 2007	4

	Notes to the Condensed Consolidated Financial Statements (Unaudited)	5

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

Item 3	Quantitative and Qualitative Disclosures About Market Risk	23

Item 4T	Controls and Procedures	24

PART II – OTHER INFORMATION

Item 1	Legal Proceedings	25

Item 1A	Risk Factors	25

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	26

Item 3	Defaults upon Senior Securities	26

Item 4	Submission of Matters to a Vote of Security Holders	26

Item 5	Other Information	26

Item 6	Exhibits	26

	SIGNATURES	28

Item 1	Financial Statements
	Condensed Consolidated Balance Sheets at December 31, 2006 (Unaudited) and June 30, 2006
	Condensed Consolidated Statements of Operations (Unaudited) for the three months ended December 31, 2006 and 2005
	Condensed Consolidated Statements of Operations (Unaudited) for the six months ended December 31, 2006 and 2005
	Condensed Consolidated Statements of Cash Flows (Unaudited) for six months ended December 31, 2006 and 2005
	Notes to the Condensed Consolidated Financial Statements (Unaudited)
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3	Quantitative and Qualitative Disclosures About Market Risk
Item 4	Controls and Procedures
PART II - OTHER INFORMATION
Item 1	Legal Proceedings
Item 1A	Risk Factors
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.	Defaults upon Senior Securities
Item 4.	Submission of Matters to a Vote of Security Holders
Item 5.	Other Information
Item 6	Exhibits
	SIGNATURES

2SILVERSTAR HOLDINGS LTD - 10-Q

SILVERSTAR HOLDINGS, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	December 31,			June 30,
	2008			2008
	Unaudited
Current assets:
Cash and cash equivalents	$	422,012		$	2,215,109
Cash restricted for foreign tax estimated liability		569,970			677,344
Accounts receivable, net		1,642,172			2,232,343
Inventories, net		707,858			445,927
Current portion of long term notes receivable		67,108			216,633
Prepaid expenses and other current assets		650,058			364,576
Assets available for sale		—			80,205
Total current assets	$	4,059,178		$	6,232,137
Property, plant and equipment, net		284,517			403,723
Software development costs, net		5,105,617			8,045,698
Investments in non-marketable securities		1,131,066			1,131,066
Intangible assets, net		3,398,514			5,732,835
Deferred charges and other assets		595,486			864,689
Total assets	$	14,574,378		$	22,410,148
Liabilities and stockholders’ (deficiency) equity
Current liabilities:
Lines of credit	$	988,727		$	1,618,164
Loan payable		1,700,884			—
Notes payable – acquisition		1,934			2,666
Earn out notes payable – acquisition		92,362			405,437
Accounts payable		2,909,445			5,041,603
Accrued royalty expense		1,403,930			1,472,424
Accrued payroll tax expense		550,768			817,269
Accrued expenses		1,482,310			2,276,573
Estimated liability for foreign tax		235,204			279,514
Total current liabilities	$	9,365,564		$	11,913,650
Convertible secured debenture, net		7,568,220			7,354,637
Other long term liabilities		387,118			421,363
Total liabilities	$	17,320,902		$	19,689,650
Stockholders’ (deficiency) equity
Preferred stock, $.01 par value; 5,000,000 shares authorized; no shares issued and outstanding		—			—
Common stock, class A, $.01 par value, 50,000,000 shares authorized; 20,129,611 and 19,956,177 shares issued and outstanding		199,945			198,210
Common stock, class B, $.01 par value, 2,000,000 shares authorized; no shares issued and outstanding		—			—
Common stock, FSAH class B, $.001 par value, 10,000,000 shares no shares issued and outstanding		—			—
Additional paid-in capital		83,694,032			83,304,462
Accumulated deficit		(85,405,143	)		(81,282,895	)
Other comprehensive income (loss)		(1,235,359	)		500,721
Total stockholders’ (deficiency) equity	$	(2,746,525	)	$	2,720,498
Total liabilities and stockholders’ (deficiency) equity	$	14,574,378		$	22,410,148

	December 31,			June 30,
ASSETS	2006			2006
Current Assets:
Cash and cash equivalents, includes restricted cash of
$735,209 and $647,797 respectively	$	3,456,757		$	9,075.259
Cash restricted for foreign tax estimated liability		3,022,734			2,933,342
Accounts receivable, net		2,808,955			637,135
Inventory		926,564			58,732
Current portion of long-term notes receivable		191,580			164,548
Prepaid expenses and other current assets		517,082			292,805
Total current assets		10,923,672			13,161,821
Property, plant and equipment, net		928,282			77,985
Investments in non-marketable securities		1,143,566			1,143,566
Long-term notes receivable		363,426			458,670
Goodwill, net		808,314			841,726
Intangible assets, net		32,044,788			1,412,854
Deferred tax asset		611,239			-
Deferred charges and other assets		490,716			441,367
Total assets	$	47,314,003		$	17,537,989
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Line of credit		2,908,531			647,797
Current portion of long-term debt		59,834			180,323
Notes payable - acquisition		5,248,151			-
Current portion of convertible secured debentures		2,743,632			900,000
Accounts payable		4,180,637			304,088
Accrued Royalty expense		2,329,384			82,643
Accrued Payroll taxes		1,427,228			49,846
Accrued expenses		2,365,883			822,463
Estimated liability for foreign tax		618,285			600,000
Total current liabilities		21,881,565			3,587,160
Long-term debt
Convertible secured debentures		1,952,084			2,318,455
Contingent liability - Empire earn out		12,102,434			-
Obligation to issue common stock		256,892			231,892
Total liabilities	$	36,192,975		$	6,137,507
Commitments, contingencies and other matters
Stockholders’ equity:
Preferred stock, $0.01 par value; 5,000,000 shares authorized;
no shares issued and outstanding
Common stock, Class A, $0.01 par value, 50,000,000 shares authorized; 9,189,154
and 8,313,774 shares issued and outstanding, respectively		91,892			83,138
Common stock, Class B, $0.01 par value; 2,000,000 shares authorized;
835,260 share issued and outstanding		8,353			8,353
Common stock, FSAH Class B $0.001 par value; 10,000,000 shares authorized;
2,671,087 shares issued and outstanding		600			600
Additional paid-in capital		67,193,297			65,573,387
Accumulated deficit		(56,633,467	)		(54,390.357	)
Accumulated comprehensive income		460,353			125,361
Total stockholders’ equity		11,121,028			11,400,482
Total liabilities and stockholders’ equity	$	47,314,003		$	17,537,989

See notes to condensed consolidated financial statements

SILVERSTAR HOLDINGS LTD - 10-Q

SILVERSTAR HOLDINGS, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three Months Ended December 31,
	Three Months Ended December 31
	2006			2005
	2008			2007
Net Revenues	$	2,960,789		$	983,434
Net revenues	$	8,717,594		$	10,796,896
Operating expenses:
Cost of sales		15,~~252~~419,~~001~~846			~~147~~4,~~664~~217,780
Development costs and royalties		~~987~~419,~~675~~669			~~325~~816,~~878~~419
Selling, general and administrative		14,~~451~~308,~~216~~042			~~727~~3,~~982~~778,992
Amortization of intangibles		630,827			34,784
Amortization of software development costs		1,114,535			958,526
Depreciation		24,948			8,220
Amortization of acquired intangibles		548,529			2,322,596
		4,346,668			1,244,528
Depreciation		51,812			47,173
Operating loss		(1,385,878	)		(261,094	)
		11,358,433			12,141,486
Other income (expense)		(20	)		17,468
Operating loss		(3,144,839	)		(1,344,590	)
Foreign currency gain (loss)		357,428			(15,697	)
Other income		309,751			100
Acquisition costs incurred		-			(209,342	)
Foreign currency gain (loss)		3,007			(80,770	)
Amortization of convertible debt discounts and issuance costs		(171,425	)		(123,169	)
Gain on sale of fixed assets		—			90,348
Interest expense		(257,896	)		(87,701	)
Amortization of convertible debt discounts and issuance costs		(424,487	)		(123,747	)
Interest income		159,480			105,179
Interest expense		(213,756	)		(133,005	)
Loss from continuing operations before income taxes		(1,298,311	)		(574,356	)
Interest income		8,849			76,356
Provision for income taxes		3,360			-
Loss before income taxes		(3,461,475	)		(1,515,308	)
Loss from continuing operations		(1,301,671	)		(574,356	)
Benefit (provision) for income taxes		(1,398	)		1,006
Discontinued operations:
Net loss	$	(3,462,873		$	(1,514,302	)
Income from operations net of Income taxes of $0 and $0, respectively		_________			119,393
Loss per share:
Net loss		($1,301,671	)		($454,963	)
Basic and diluted	$	(.17	)	$	(.08	)
Income (loss) per share:
Weighted average common stock outstanding:
Basic
Basic and diluted		20,129,611			19,771,824
Continuing operations		($.14	)		($0.06	)
Discontinued operations		-		$	.01
Net loss		($.14	)		($0.05	)
Diluted
Continuing operations		($.14	)		($0.06	)
Discontinued operations		-			.01
Net loss		($.14	)		($0.05	)
Basic		9,431,657			9,076,518
Diluted		9,431,657			9,548,425

See notes to condensed consolidated financial statements

SILVERSTAR HOLDINGS LTD - 10-Q

SILVERSTAR HOLDINGS, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Six Months Ended December 31,
	2006			2005
	2008			2007
Net Revenues	$	3,239,534		$	1,354,143
Net revenues	$	17,539,621		$	14,675,573
Operating Expenses:
Operating expenses:
Cost of sales		19,~~371~~368,~~570~~462			~~192~~5,~~733~~816,582
Development costs and royalties		1,~~055~~031,~~716~~673			~~442~~1,~~863~~429,923
Selling, general and administrative		27,~~065~~399,~~171~~323			16,~~315~~737,~~326~~372
Amortization of intangibles		673,188			68,702
Amortization of software development costs		2,223,992			1,548,632
Depreciation		32,678			16,227
Amortization of acquired intangibles		1,035,774			4,434,262
		5,198,323			2,035,851
Depreciation		106,146			90,827
Operating loss		(1,958,789	)		(681,708	)
		21,165,370			20,057,598
Other income (loss)		(9	)		41,338
Operating loss		(3,625,749	)		(5,382,025	)
Foreign currency gains		95,355			17,540
Other income (loss)		612,057			(12,395	)
Acquisition costs incurred		-			(209,342	)
Foreign currency gains (losses)		(158,087	)		53,028
Amortization of convertible debt discounts and issuance costs		(330,532	)		(123,169	)
Gain on sale of fixed assets		177,637			90,348
Interest expense		(360,722	)		(94,836	)
Amortization of convertible debt discounts and issuance costs		(700,881	)		(554,916	)
Interest income		314,948			189,293
Interest expense		(456,720	)		(301,462	)
Loss from continuing operations before income taxes		(2,239,749	)		(860,884	)
Interest income		30,890			145,605
Provision for income taxes		(3,360	)		-
Loss before income taxes		(4,120,853	)		(5,961,817	)
Loss from continuing operations		(2,243,109	)		(860,884	)
Benefit (provision) for income taxes		(1,398	)		1,006
Discontinued operations:
Net loss	$	(4,122,251	)	$	(5,960,811	)
Income from operations net of Income taxes of $0 and $0, respectively		-			357,623
Loss per share:
Net loss		($2,243,109	)		($503,261	)
Basic and diluted	$	(.21	)	$	(.35	)
Income (Loss) per share:
Weighted average common stock outstanding:
Basic
Basic and diluted		20,098,360			16,931,654
Continuing operations		($0.24	)		($0.10	)
Discontinued operations	$	-		$	.04
Net loss		($0.24	)		($0.06	)
Diluted
Continuing operations		($0.24	)		($0.09	)
Discontinued operations	$	-		$	.04
Net loss		($0.24	)		($0.06	)
Basic		9,290,346			9,072,551
Diluted		9,290,346			9,586,842

See notes to condensed consolidated financial statements

SILVERSTAR HOLDINGS LTD - 10-Q

SILVERSTAR HOLDINGS, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(UNAUDITED)

	Six Months Ended December 31,
	2006			2005
	2008			2007
Cash flows from operating activities:
Net (loss) from operations	$	(2,243,109	)	$	(503,261	)
Net loss	$	(4,122,251	)	$	(5,960,811	)
Depreciation and amortization		14,~~036~~066,~~398~~793			~~208~~6,~~097~~631,637
Loss on disposal of fixed assets		10,195
Loss on disposal of marketable securities		—			12,500
Stock-based compensation		77,585			34,188
Gain on disposal of fixed assets		(177,367	)		(90,348	)
Stock issued for services		58,740
Stock-based compensation		223,036			234,631
Unrealized foreign currency gains		(113,913	)		(71,657	)
Stock issued for services		98,358			24,391
Accrued interest income on notes receivable		(14,453	)		(120,031	)
Unrealized foreign currency loss (gain)		3,271,186			(191,497	)
Changes in operating assets and liabilities, net		1,609,063			(399,287	)
Accrued interest income on notes receivable		(3,263	)		(12,958	)
Increase in other assets		(10,932	)
Changes in operating assets and liabilities, net		(3,976,458	)		(4,870,574	)
Increase in other liabilities		25,000
Decrease in estimated liability for foreign tax		—			(291,829	)
Net changes in assets and liabilities of discontinued operations		-			(628,028	)
Increase (decrease) in other assets		(70,000	)		77,795
Net cash provided by( used in) operating activities		434,574			(1,479,979	)
Net cash used in operating activities	$	(690,236	)	$	(4,437,063	)
Cash flows from Investing activities:
Cash flows from investing activities:
Acquisition expenses capitalized		-			(3,322	)
Proceeds from sale of fixed assets		152,328			660,896
Cost paid for acquisition of Empire Interactive		(8,072,070	)
Purchase of fixed assets		(74,711	)		(95,309	)
Proceeds from sale of fixed assets		11,008
Purchase of intangible assets		—			(435,465	)
Purchase of fixed assets		(3,971	)		(1,896	)
Proceeds from repayment of long-term note receivable		127,916			96,537
Proceeds from repayment of long-term note receivable		99,281			48,164
Increase in cash restricted for foreign tax estimated liability		—			274,171
Net cash provided by (used) in investing activities		(7,965,752	)		42,946
Net cash provided by investing activities	$	205,533		$	500,830
Cash flows from financing activities:
Short term borrowings (repayments), net		(258,502	)		628,412
Short term borrowings (repayments,) net of loan issuance fees of $281,018 and $0, respectively		427,682			(5,917,901	)
Increase in deposits held in escrow		-			(1,184,450	)
Proceeds from exercise of warrants		—			1,397,937
Increase in bank overdraft		-			65,865
Proceeds from private placement sales of common stock, net of offering costs of $1,084,731		—			7,915,264
Net proceeds from convertible debenture		1,129,714			4,373,301
Proceeds from the exercise of stock options		—			170,850
Repayment of long term debt		-			(89,303	)
Net cash provided by financing activities	$	427,682		$	3,566,150
Proceeds from private placement sales of common stock		650,000			-
Effect of exchange rates on cash		(1,736,076	)		(83,406	)
Proceeds from the exercise of stock options		56,472			22,500
Net decrease in cash and cash equivalents		(1,793,097	)		(453,489	)
Net cash provided by discontinued operations		-			277,864
Cash and cash equivalents, beginning of period		2,215,109			3,693,149
Net cash provided by financing activities		1,577,684			4,094,189
Cash and cash equivalents, end of period	$	422,012		$	3,239,660
Effect of exchange rates on cash		334,992			66,289
Net increase (decrease) in cash and cash equivalents		(5,618,502	)		2,723,445
Cash and cash equivalents, beginning of period		9,075,259			4,865,291
Cash and cash equivalents, end of period	$	3,456,757		$	7,588,736
Supplemental cash flow information:
Cash paid for interest	$	~~296~~591,~~404~~477		$	50467,~~815~~758
Cash paid for income taxes	$	—		$	800

See notes to condensed consolidated financial statements.

SILVERSTAR HOLDINGS LTD - 10-Q

SILVERSTAR HOLDINGS, LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1.

FINANCIAL INFORMATION

~~The Company~~Silverstar isHoldings, ~~a holding company that seeks to acquire businesses fitting a predefined investment strategy~~Ltd. ~~The~~(the “Company”) is the parent company of Empire Interactive, PLC (“Empire”), a leading worldwide publisher of interactive entertainment software for all game platforms, as well as Strategy First, Inc. (“Strategy First”), a leading worldwide publisher of entertainment software for the Personal Computer (PC). The Company is also a minority shareholder in Magnolia Broadband Wireless, a development stage company which is developing mobile wireless broadband products.

NOTE 2. ~~LIQUIDITY~~GOING ~~CONSIDERATIONS~~CONCERN

~~We currently~~As doshown ~~not~~in ~~have~~the ~~sufficient~~accompanying ~~cash~~condensed onconsolidated ~~hand~~financial tostatements, ~~meet~~the ~~our~~Company ~~short~~has ~~and~~incurred ~~long~~recurring ~~term obligations.~~losses ~~While~~from inoperations, ~~the~~negative ~~past~~cash flows from operations, ~~the~~and, ~~Company~~as ~~has~~of ~~succeeded~~December in31, ~~meeting~~2008, its ~~cash flow~~current ~~requirements~~liabilities ~~through~~exceeded its current assets by $5.306 million. These factors raise substantial doubt about the ~~raising~~Company’s ofability ~~additional~~to ~~debt~~continue oras ~~equity~~a going concern. Since June 2008, the ~~sale~~Company has ~~of assets~~ been orseeking ~~through~~to ~~operating~~raise ~~cash~~additional ~~flow,~~capital ~~there~~in isthe noform ~~guarantee~~of ~~that~~both itdebt ~~may~~and ~~be successful~~equity; into ~~doing~~this sopoint ~~going~~with ~~forward~~no success. The ~~Company’s~~results ~~failure~~of tothe doquarter soended ~~will~~December ~~raise substantial~~31, ~~doubt~~2008 ashave tofurther ~~its~~impacted ~~ability~~the toCompany’s ~~continue~~liquidity asposition and without a ~~going~~very ~~concern.~~short-term ~~Management’s plans~~solution to ~~alleviate~~ this ~~uncertainty~~lack ~~are~~of asliquidity, ~~follows:~~there is substantial doubt about the Company’s ongoing viability.

·Assuming ~~raise~~that ~~additional~~it ~~capital~~overcomes ~~through~~its ~~the~~current ~~sale~~liquidity ofshortfall, ~~equity~~the orCompany ~~additional~~plans ~~debt. To this end management has received various indications of interest from investors~~ to ~~raise~~meet ~~additional~~its ~~capital~~ongoing ~~either~~cash ~~through~~requirements ~~subordinated~~set ~~debt,~~forth ~~preferred stock or a placement of common stock.~~below:

·• ~~generate~~Generate ~~significant short term~~ operating earnings and cash flow primarily through its ~~newly~~Empire ~~acquired~~ subsidiary. Empire’s ~~Interactive.~~title ~~PLC~~release schedule for the next 12 months includes several multi-platform games, including sequels to Animal Paradise DS game and DS titles licensed from Play First such as Diner Dash, Wedding Dash and Chocalatier. ~~Empire~~• ~~currently~~Raise ~~has~~additional ~~substantially~~capital ~~completed~~through the ~~first~~possible ~~Next~~sale ~~Generation~~of ~~version~~certain intellectual property. The Company intends to retain an investment banker to determine which of its ~~best~~intellectual ~~selling~~property ~~Flat~~assets ~~Out~~can ~~franchise~~be sold to realize significant value. • The ~~company~~Company ~~anticipates~~has approximately $570,000 of restricted cash set aside to match its current South African tax assessment. The Company believes that ~~the~~it ~~launch~~has ofstrong arguments to set aside this ~~game,~~assessment. ~~along~~If ~~with~~this ~~Empire’s~~assessment ~~ongoing~~is ~~business~~set aside, this cash will ~~generate~~be ~~operating~~available ~~profits~~for ~~and~~operations. ~~cash~~A ~~flow~~court hearing in ~~the~~this ~~short~~matter ~~term~~was held in early December 2008 and a judgment is expected shortly. • Seek strategic collaborations which may include joint ventures or partnerships for publishing game titles, merger, sale of assets, or other similar transactions. • Debt restructuring at one or both of our subsidiaries either through a voluntary or involuntary court process.

·Management ~~The~~anticipates ~~Company~~that ~~has~~these ~~approximately~~actions ~~$2.6~~and ~~million~~others ~~restricted~~to ~~cash~~be intaken ~~South~~by ~~Africa~~the ~~set~~Company ~~aside~~will toprovide ~~match~~the ~~its~~opportunity ~~current~~for ~~South~~it ~~African~~to ~~tax~~improve ~~assessment~~liquidity and possibly achieve profitability. The ~~Company~~accompanying isfinancial ~~vigorously~~statements ~~seeking~~do tonot ~~set~~include ~~this~~any ~~assessment~~adjustments ~~aside~~that ~~and~~might be necessary if itthe ~~does~~Company sois ~~these~~unable ~~resources~~to ~~will~~continue as a going concern. However, there can be ~~available~~no ~~for~~assurance ~~general~~that ~~corporate~~any ~~purposes~~of these events will occur.

· In the event the Company is unsuccessful in any of the above measure, it may seek to renegotiate some of the terms of its larger short term liabilities, primarily related to the acquisition of Empire Interactive and its outstanding convertible debentures

Management believes that the actions that will be taken by the Company provide the opportunity for the Company to improve liquidity and achieve profitability. However there can be no assurance that such events will occur.

The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

NOTE 3.

BASIS OF PREPARATION

The unaudited consolidated financial statements include the accounts of the Company and all of its subsidiaries in which it has a majority voting interest. Investments in affiliates are accounted for under the equity or cost method of accounting. All significant ~~intercompany~~inter-company accounts and transactions have been eliminated in the consolidated financial statements.

Pursuant to the rules and regulations of the Securities and Exchange Commission for Form 10-Q, the financial statements, footnote disclosures and other information normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed. The financial statements contained in this report are unaudited but, in the opinion of the Company, reflect all adjustments, consisting of only normal recurring adjustments necessary to fairly present the financial position as of December 31, 2006 and the results of operations and cash flows for the interim periods of the fiscal year ending June 30, 2007 ("fiscal 2007") and the fiscal year ended June 30, 2006 ("fiscal 2006") presented herein. The results of operations for any interim period are not necessarily indicative of results for the full year. These financial statements, footnote disclosures and other information should be read in conjunction with the financial statements and the notes thereto included in the Company's annual report on Form 10-K for the year ended June 30, 2006. 5

SILVERSTAR HOLDINGS LTD - 10-Q

Pursuant to the rules and regulations of the Securities and Exchange Commission for Form 10-Q, the financial statements, footnote disclosures and other information normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed. The financial statements contained in this report are unaudited but, in the opinion of the Company, reflect all adjustments, consisting of only normal recurring adjustments necessary to fairly present the financial position of the Company as of December 31, 2008 and the results of its operations and its cash flows for the three and six months ended December 31, 2008 and the fiscal year ended June 30, 2008 (“fiscal 2008”) presented herein. The results of operations for the interim periods are not necessarily indicative of results for the full year. These financial statements, footnote disclosures and other information should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s annual report on Form 10-K for the year ended June 30, 2008.

Net Income or Loss Per Share

Basic net income or loss per share is computed by dividing net income or loss by the weighted average number of shares of common ~~shares~~stock outstanding. Diluted net income or loss per share is computed by dividing net income or loss by the weighted average number of shares of common ~~shares~~stock outstanding and dilutive potential shares of common ~~shares~~ stock reflecting the dilutive effect of stock options, warrants, ~~convertible~~ convertible debentures and shares to be issued in connection with prior acquisitions. Dilutive potential common shares, stock options, warrants and convertible debentures for all periods presented are computed utilizing the treasury stock method except for convertible debentures which are computed using the “if converted” method. The ~~dilutive~~total ~~effect~~number of shares tothat becould ~~issued~~potentially indilute ~~connection~~earnings ~~with~~per share, but which were not included in the calculations of diluted earnings ~~obligations~~ per ~~related~~share because to ~~prior~~do ~~acquisitions~~so iswould ~~computed~~have ~~using~~been anti-dilutive, was 442,559 and 1,096,227 for the ~~average~~three ~~market price~~months ended December 31, 2008 and 2007, respectively, and 506,645 and 918,068 for the ~~quarter.~~six months ended December 31, 2008 and 2007, respectively.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and all highly liquid investments with original maturities of three months or less. The ~~vast~~ majority of ~~our~~the Company’s cash balances are held in liquid accounts at two highly rated financial institutions. While these deposits are not insured, the quality of such financial institutions is such that the risks of loss on these funds are minimal. ~~Restricted cash balances at December 31, 2006 totaled $735,209, which is used as collateral on the Company’s line of credit.~~

Reclassifications

Royalty expenses totaling $414,816 for the ~~three~~quarter ~~and~~ended ~~six months ending~~ December 31, ~~2005~~2007 ~~totaling $325,878 and $442,683~~ have been reclassified from ~~cost~~selling, ofgeneral, ~~sales~~and toadministrative ~~development~~expenses ~~costs and royalties~~ to conform to the fiscal ~~2007~~2009 presentation.

Software Development Cost

Under Statement of Financial Accounting Standard (“SFAS”) No. 86 software development cost should be capitalized once technical feasibility is achieved. In the case of Empire this would be when the product is commercially viable (“commercial feasibility”). The Company has determined to its satisfaction that there is a clearly defined decision point quite early in development where a product passes from concept to commercial feasibility. This decision point is either reached with the consent of outside parties such as Sony or Microsoft or through an internal process where management decides to move forward with a product’s development once a game concept has been approved. The Company also found that there has been no material instance where concept approval has been given and a game has not become a commercial product. The Company has, therefore, decided to capitalize software development costs after concept approval.

Stock-Based Compensation

In December 2004, the Financial Accounting Standards Board (“FASB”) issued ~~Statement~~ ~~of Financial Accounting Standards (“~~SFAS”) No. 123R, “Share-Based Payment.” This standard replaced SFAS No. 123, “Accounting for Stock-Based Compensation” and supersedes Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees.” The standard requires companies to ~~recognize~~ recognize all share-based payments to employees, including grants of employee stock options, in the financial statements based on their fair values on the grant date and is effective for annual periods beginning after June 15, 2005. In accordance with the revised statement, the Company recognizes the expenses attributable to stock options granted or vested subsequent to July 1, 2005. During the six month periods ending December 31, 2006 and December 31, 2005 the Company recognized expenses of $77,585 and $17,094, respectively, for employee stock options that vested during fiscal years 2007 and 2006. Based on existing unvested option agreements the Company anticipates an additional expense of approximately $74,070 in fiscal 2007 which could increase if additional options are granted during the fiscal year. As of December 31, 2006, $178,344 of total unrecognized compensation costs related to non-vested options is scheduled to be recognized over a weighted average period of 1.72 years. ended

The weighted average grant date fair value of options granted during the six months ended December 31, 2006 and the significant assumptions used in determining the underlying fair value of each option grant on the date of the grant utilizing the Black Scholes option pricing model are noted in the following table. Expected volatility is based on historical volatility data of the Company’s stock. The expected term of stock options granted is based on historical data and represents the period of time that stock options are expected to be outstanding. The risk-free rate of the stock options is based on the United States Treasury rate in effect at the time of grant. For the six months ended December 31, 2005, the Company did not grant stock options.6

	2006
Weighted average grant-date fair value of options granted	$	1.04
Assumptions:
Risk free interest rate		4.65-4.71	%
Expected life		2-4 years
Expected volatility		48-95	%
Expected dividend yield		0.00	%

SILVERSTAR HOLDINGS LTD - 10-Q

~~As of~~ December 31, ~~2006,~~2008 and 2007 and the Company ~~had~~recognized 1expenses of $166,~~297~~428 and $154,~~405~~631, respectively, for employee stock options ~~outstanding,~~that vested. The Company also recognized expenses of ~~which 1~~ $56,~~138~~608 and $80,~~635~~000, ~~are~~respectively, ~~fully~~for ~~vested~~the vesting of restricted shares. ABased ~~summary~~on ofexisting ~~the~~unvested ~~activity~~option inagreements the Company’s ~~stock~~anticipates an additional expense of approximately $146,267 in fiscal year 2009 which could ~~option~~ increase ~~plans~~if isadditional asoptions ~~follows~~are ~~for~~granted during the ~~six~~fiscal ~~months~~year. ~~ended~~As of December 31, ~~2006:~~ 2008, $416,941 of total unrecognized compensation costs related to non-vested options is scheduled to be recognized over a weighted average period of 2.06 years.

	Share Subject Options Outstanding	Weighted Average Exercise
Outstanding, beginning of year	1,287,405	2.17
Granted	170,000	1.85
Forfeited	(95,000)	.74
Exercised	65,000	.87
Outstanding December 31, 2006	1,297,405	2.29

The weighted average grant date fair value of options granted during the six months ended December 31, 2008 and the significant assumptions used in determining the underlying fair value of each option grant on the date of the grant utilizing the Black Scholes option pricing model are noted in the following table. Expected volatility is based on historical volatility data of the Company’s stock. As a result of the acquisition of Empire which significantly changed the size and complexity of the Company, the volatility of most options granted after March 31, 2007 were computed using the average volatility of competitor companies in the entertainment software industry. Historical stock prices would not be indicative of their future prices, since the Company itself is so different from what it was historically. SFAS 123(R) requires the use of expected volatility in the calculation of the compensation expense of a stock option. While it allows the use of historical volatility in calculating expected volatility, it does not require the use of historical volatility only and encourages the use of other factors. The Company continues to use the average volatility of competitor companies until such time there is sufficient historical volatility data (post Empire acquisition) that equals or exceeds the expected term of the options granted. The expected term of stock options granted is based on historical data and represents the period of time that stock options are expected to be outstanding. The risk-free rate of the stock options is based on the US Treasury rate in effect at the time of grant. The risk-free rate of the stock options is based on the US Treasury rate in effect at the time of grant. Details of the option activity for the six months ended December 31, 2008 were as follows:

NOTE 4. INTANGIBLE ASSETS

	2008
Weighted average grant-date fair value of options granted	$.08
Assumptions:
Risk free interest rate	.9% - 3.12%
Expected life	1- 4 Years
Expected volatility	43%-117%
Expected dividend yield	0

~~The following~~As ~~table~~of ~~presents~~December ~~details~~31, of2008, the ~~purchase~~Company had 2,949,167 stock options outstanding, of ~~finite-life~~which ~~intangibles as part~~1,771,944 are fully vested with zero intrinsic value. A summary of the ~~acquisitions~~activity ofin ~~Strategy~~the ~~First~~Company’s ~~and~~stock ~~Empire~~option ~~Interactive.~~plans is as follows for the six months ended December 31, 2008:

	Estimated			Gross Carrying		Accumulated
	Share Options Outstanding		Weighted Average Exercise
	Useful Life			Amount		Amortization			Total
Outstanding June 30, 2008	2,589,167		$1.58
Covenant not to compete		3 years		$	42,867		($23,813	)	$	19,054
Granted	1,270,000		$.48
Game titles - Empire Interactive		5 years		$	31,357,466		(588,025	)	$	30,769,441
Expired	(230,000	)	$1.84
Game titles - Strategy First		10 years		$	1,485,374		(229,081	)	$	1,256,293
Terminated	(680,000	)	$2.04
Balance on December 31, 2006				$	32,885,707	$	(840,919	)	$	32,044,788
Outstanding, December 31, 2008	2,949,167		$98
		Estimated			Gross Carrying		Accumulated
		Useful Life			Amount		Amortization			Total
Covenant not to compete		3 years		$	44,638		($17,356	)	$	27,282
Game titles - Strategy First		10 years			1,546,773		(161,201	)		1,385,572
Balance on June 30, 2006				$	1,591,411	$	(178,557	)	$	1,412,854

~~Intangible assets~~NOTE ~~that are subject to amortization are reviewed for potential impairment whenever events or circumstances indicate that carrying amounts may not be recoverable~~4. ~~Assets~~SOFTWARE ~~not~~DEVELOPMENT ~~subject to amortization are tested for impairment at least annually.~~COSTS

~~The Covenant~~As ~~not~~of toDecember ~~compete~~31, 2008 and ~~the~~June ~~Game~~30, ~~titles~~2008, ~~acquired~~capitalized assoftware ~~part~~development ofcosts ~~the~~totaled ~~acquisition of~~$10,241,079 ~~Strategy~~and ~~First~~$12,544,806, ~~are~~respectively. ~~both~~Total ~~amortized~~costs ~~using~~capitalized during the ~~straight-line~~three ~~method~~and six months ended December 31, 2008 were $527,380 and $ 1,497,736, respectively. ~~The~~Accumulated ~~Game titles~~amortization ofat ~~Empire~~December 31, 2008 and at June 30, 2008 totaled $5,135,462 and $4,499,108, respectively. Capitalized software development costs are amortized over a five-year period based on weighted average expected sales from the date the title is launched. ~~For titles that have not yet been launched as of December 31, 2006 a launch date was estimated to project future amortization~~

Amortization expense for intangible assets for the six months periods ended December 31, 2006 and 2005 were $673,188 and $68,702 respectively. Estimated amortization expense for the rest of fiscal 2007 and for the succeeding five fiscal years is as follows: 7

2007	$	4,006,928
2008		10,078,834
2009		7,430,481
2010		6,069,414
2011		2,273,383
2012		1,160,930
Thereafter		1,024,818
	$	32,044,788

SILVERSTAR HOLDINGS LTD - 10-Q

NOTE 5. ~~ACQUISITIONS~~INTANGIBLE ASSETS

OnThe ~~December~~components ~~4, 2006, the Company announced that it had achieved more than 90% acceptance~~ of ~~its~~amortizable ~~offer~~intangible toassets ~~acquire~~as ~~the shares~~ of ~~Empire Interactive PLC. Based on these acceptances, the Company announced a formal closing of the officer to Empire shareholders and took control effective~~ December 131, 2006. The offer provided for either a cash payment of approximately $.13 per share (£.07 p), or an earn-out alternative, where the initial payment was approximately $.09 per share (£.049 p), with a further $.094 per share (£.05 p) in loan notes payable in October 2007. Additionally, there is an earn-out payable in April 2008. ~~The~~and ~~earn-out is based on a formula of Empire’s EBITDA for the fiscal year ended~~ June 30, 2007. The acquisition was recorded assuming the earn out targets will be fully achieved and the Company’s December 31, 2006 Balance Sheet includes a liability of £6,177,548 p, or $12,102,434 USD based on the December 31, 2006 foreign exchange rate of 1.959 US dollar to the British pound. The aggregate purchase price for Empire’s stock, assuming the full earn out threshold is met, will be approximately $26.1 million or £13.4 million based on the December 1, 2006 foreign exchange rate of 1.9508 US dollar to the UK pound of which amount approximately $5.2 million are loan notes which mature October 31, 2007, and $12.1 million are loan notes payable in April 2008 ~~if earnings targets~~ are achieved. $.7 million of the acquisition expenses were paid by the issuance of 406,180 shares of Silverstar’s Class A common stock. Of this amount 350,000 shares were issued to a consultant to the Company as a finder’s fee for the transaction pursuant to his consulting contract. The consultant was subsequently appointed Chairman of the Board of Empire Interactive PLC. Of the remaining $8.1 million of the purchase price approximately $7.6 million has been paid by utilizing the Company’s internal cash resources. The remaining $.5 million has been accrued as a short-term liability.follows:

The purchase price was allocated on the basis of the estimated fair values of the assets acquired and liabilities assumed. The acquisition was accounted for as a purchase. The intangible assets identified in connection with the acquisition were recorded and are being amortized in accordance with the provisions of SFAS No. 141 and 142.

	Estimated Useful Life		Gross Carrying Amount		Accumulated Amortization		Total

Game titles – Strategy First	10 years	$	1,416,863	$	(501,929)	$	914,934
Game titles – Empire Interactive	5 years		16,833,343		(14,349,763)		2,483,580
Balance on December 31, 2008		$	18,250,206	$	(14,851,692)	$	3,398,514

Purchase price:

	Estimated Useful Life		Gross Carrying Amount		Accumulated Amortization		Total

Game titles – Strategy First	10 years	$	1,713,520	$	(521,333)	$	1,192,187
Game titles – Empire Interactive	5 years		23,198,600		(18,657,952)		4,540,648
Balance on June 30, 2008		$	24,912,120	$	(19,179,285)	$	5,732,835

Net assets acquired:
Current assets	$	3,226,230
Fixed assets		898,804
Intangible assets		31,224,616
Other assets		608,650
Total assets		35,958,300
Total liabilities		(9,856,885	)
	$	26,101,415

Intangible assets that are subject to amortization are reviewed for potential impairment whenever events or circumstances indicate that carrying amounts may not be recoverable. Assets not subject to amortization are tested for impairment at least annually. Through December 31, 2008, consumer demand for the Company’s software entertainment products remained intact. However, in the event that the global economic slowdown continues to worsen and a drop in demand for the Company’s products becomes evident, the Company may test these carrying values for impairment before the end of its fiscal year.

~~The following~~Amortization ~~unaudited~~expense ~~proforma~~for ~~summary~~intangible ~~presents~~assets ~~consolidated~~for ~~financial~~the ~~information as~~three ifand ~~the~~six ~~acquisition~~month ofperiods ~~Empire~~ended ~~Interactive~~December ~~had~~31, ~~occurred~~2008 ~~effective~~were ~~July~~$548,529 and $1, ~~2006 and~~035,774, ~~2005~~ respectively. ~~The~~Amortization ~~proforma~~expense ~~information~~for ~~does~~intangible ~~not~~assets ~~necessarily~~for ~~reflect~~ the ~~actual~~ ~~results~~three ~~that~~and ~~would~~six ~~have~~month ~~occurred~~periods ended December 31, ~~nor~~2007 iswere it$2,322,596 ~~necessarily~~and ~~indicative~~$4,434,262, ~~of future~~respectively. ~~results~~Estimated ofamortization ~~operations~~expense for the rest of fiscal year 2009 and for the ~~consolidated~~succeeding ~~entities.~~five fiscal years is as follows:

Six Months Ended Dec 31,2006
2009	$ 90,998
		Silverstar			Empire			Proforma
2010	815,551
Net Revenues		$	1,198,844		$	12,475,102		$	13,673,946
2011	763,717
Operating Expenses:
2012	497,118
Cost of sales			403,322			3,331,229			3,734,551
2013	270,261
Development costs and royalties			184,005			4,366,175			4,550,180
2014	225,329
Selling, general and administrative			1,369,322			3,830,537			5,199,859
Thereafter	135,540
Amortization of intangibles			84,061			3,229,476			3,313,537
	$ 3,398,514
Depreciation			15,315			108,106			123,421
			2,056,025			14,865,523			16,921,548
Operating loss			(857,181	)		(2,390,421	)		(3,247,602	)
Other expense			(9	)		(311,317	)		(311,326	)
Foreign currency loss			(37,154	)		(34,061	)		(3,093	)
Amortization of convertible debt discounts and issuance Costs			(330,532	)		-			(330,532	)
Interest expense			(235,174	)		(155,543	)		(390,717	)
Interest income			313,452			1,496			314,948
Loss from continuing operations before income taxes			(1,146,598	)		(2,821,724	)		(3,968,322	)
Income tax expense			-			26,669			26,669
Net loss			(1,146,598	)		(2,848,393	)		(3,994,991	)
Loss per share								$	(.42	)
Basic and diluted:

Six Months Ended Dec 31,2005
	Silverstar			Empire			Proforma
Net Revenues	$	1,354,143		$	12,896,061		$	14,250,004
Operating Expenses:
Cost of sales		192,733			4,443,858			4,636,591
Development costs and royalties		442,863			5,007,823			5,450,686
Selling, general and administrative		1,315,326			4,417,749			5,733,075
Amortization of intangibles		68,702			5,321,293			5,389,995
Depreciation		16,227						16,227
		2,035,851			19,190,723			21,226,574
Operating loss		(681,708	)		(6,294,662	)		(6,796,370	)
Other income		41,338						41,338
Foreign currency loss		17,540						17,540
Acquisition costs incurred		(209,342	)					(209,342	)
Amortization of convertible debt discounts and issuance Costs		(123,169	)					(123,169	)
Interest expense		(94,836	)		(85,343	)		(180,179	)
Interest income		189,293						189,293
Loss from continuing operations, net of income taxes of $0		(860,884	)		(6,380,005			(7,240,889	)
Discontinued operations: Income from operations, net of income taxes of $0		357,623						357,623
Net loss		(503,261	)		(6,380,005	)		(6,883,266	)
Income (loss) per share
Basic
Continuing operations							$	(.77	)
Discontinued operations								04
Net loss							$	0.73
Diluted
Continuing operations							$	(.74	)
Discontinued operations								.04
Net loss							$	0.69

~~NOTE 6.~~SILVERSTAR ~~DISCONTINUED~~HOLDINGS ~~OPERATIONS~~LTD - 10-Q

~~On April~~NOTE ~~7, 2006, the Company sold all the assets and certain liabilities of Fantasy Sports, Inc~~6. ~~(“Fantasy~~CASH Sports”) to FUN Technologies, LLC for approximately $4.4 million, including $3.85 million paid in cash at closing. The gain on disposal of this business segment was reported during the quarter ended June 30, 2006.FLOWS

In accordance with accounting principles generally accepted in the United States of America, the net income related to Fantasy Sports has been included in discontinued operations in the company's consolidated statements of operations.

	Six Months Ended December 31,
	2008			2007
Changes in operating assets and liabilities consist of the following:
Decrease in accounts receivable	$	167,926		$	2,378,479
Increase in inventories		(189,884	)		(36,695	)
(Increase) decrease in prepaid expenses and current assets		(68,189	)		263,756
Software development costs capitalized		(1,497,736	)		(3,079,923	)
Decrease in accounts payable		(1,527,464	)		(2,809,953	)
Decrease in refundable deposits		—			(630,403	)
Decrease in accrued expenses		(861,111	)		(955,835	)
		($3,976,458	)		($4,870,574	)
Issuance of shares of common stock for debt repayment	$	—		$	3,600,000
Issuance of shares of common stock for payment of accrued expenses	$	120,000		$	—

~~The following~~NOTE ~~summarizes the operating results of the discontinued operations~~7. DEBT

	Three Months Ended December 31,					Six Months Ended December 31,
	2006		2005			2006		2005
Revenue	$	-	$	553,380	Revenue	$	-	$	1,149,108
Net income	$	-	$	119,393	Net Income	$	-	$	357,623

Lines of Credit

~~NOTE 7~~In June 2002, the Company obtained a secured line of credit facility for borrowings up to $1.0 ~~CASH~~million, ~~FLOWS~~which was fully secured by cash balances held in the Company’s account. This liability is due on demand and has a floating interest rate that is based on the prime rate minus 1.75%. The balance outstanding under this line of credit at December 31, 2008 and June 30, 2008 was $0 and $985,995, respectively.

~~Changes in~~Empire ~~operating~~has ~~assets~~a line of credit secured by its receivables, inventory, real property and ~~liabilities~~intangible ~~consist~~assets. As of December 31, 2008 and June 30, 2008 the ~~following:~~amount outstanding under this facility was $988,727 (£682.870) and $632,169 (£316,813), respectively. The line of credit accrues interest at an annual rate of 7%. This line expired on June 30, 2008; however, it has been extended on a monthly basis and now expires on March 8, 2009.

	Six Months Ended December 31,
	2006			2005
Increase (decrease) in accounts receivable	111,813			($654,418	)
Increase (decrease) in inventories	12,483			(52,251	)
Increase in prepaid expenses and current assets	(149,128	)		(219,311	)
Increase in accounts payable	43,151			92,173
Increase (decrease) in accrued expenses	990,744			(51,490	)
Increase (decrease) in deferred revenue	-			486,010
	($1,609,063	)		($399,287	)
Cash flows from operating activities - discontinued operations:
Changes in net assets and liabilities of discontinued operations
Depreciation and amortization	-		$	( 3,856	)
Changes in operating accounts	-			598,958
Changes in cash (included in) from net assets and from discontinued operations	-			32,926
Changes in net assets and liabilities of discontinued operations	-		$	628,028
Cash flows from financing activities - discontinued operations:
Short-term borrowings (repayments), net	-		$	277,864

Loan Payable

~~Non~~On November 7, 2008, the Company’s subsidiary Empire Interactive Europe, Limited completed a short-~~cash investing~~term loan of up to $2.1 million with Full Circle Partners, LP. As of December 31, 2008, $1,700,884 was outstanding under this facility. This loan is secured by certain receivables of Empire Interactive Europe, Limited and ~~financing~~Empire ~~activities~~Interactive, ~~were~~Inc. as ~~follows:~~well as the shares of these companies and of Empire Interactive Holdings, Limited and matures on April 7, 2009. The loan has a fixed interest rate of 15%. The Company incurred issuance costs of $376,018 in connection with this loan which are being amortized over the life of the loan. During the three months ended December 31, 2008, amortization of these costs totaled $148,093. The remaining unamortized loan costs of $227,925 will be fully amortized by the April 7, 2009, the maturity date of the loan.

Issuance of stock as payment for acquisition expenditures	$	723,000	-
Issuance of Notes payable to former Empire shareholders	$	5,208,502	-
Issuance of Notes payable to former Empire shareholders
contingent on earn out targets being achieved	$	12,051,061	-

Notes Payable

~~NOTE 8~~At December 31, 2008 and June 30, 2008 the Company owed $1,934 and $2,666 in notes payable to former shareholders of Empire pursuant to an offer made for the acquisition of Empire. ~~BUSINESS~~This ~~SEGMENTS~~amount accrues interest at 4% per annum and was payable on October 31, 2007. All note holders who have tended their notes have been paid in full.

~~As a result~~The ofCompany ~~the~~owed ~~sale~~$92,362 as of ~~all~~December ~~the~~31, ~~assets~~2008 ~~and~~as ~~certain~~earn ~~liabilities~~out ofconsideration ~~Fantasy~~based ~~Sports~~ on ~~April~~Empire’s 7,EBITDA ~~2006~~for the ~~Company~~fiscal noyear ~~longer~~ended ~~operates~~June in30, ~~the~~2007 ~~internet~~that ~~fantasy~~was ~~sports games~~payable ~~segment~~on ~~and~~April ~~now~~30, ~~only operates in one segment -- interactive entertainment software~~2008. The ~~operations~~ ofbalance ~~Fantasy~~on ~~Sports~~these ~~which~~notes ~~fully~~at ~~comprised~~June ~~the~~30, ~~Company’s~~2008 ~~operations~~was ~~in the~~$405,437. ~~internet~~Interest ~~fantasy~~accrued ~~sports~~at ~~games~~4% ~~segment~~per ~~have~~annum ~~been~~beginning ~~reported~~November ~~as discontinued operations for the periods ended December 31~~1, ~~2005~~2007.

The operations of the interactive entertainment software segment are focused on the development and publishing of software games for all game platforms The interactive entertainment software segment is composed of the operations of Empire Interactive and Strategy First. Empire Interactive is a leading publisher of interactive entertainment software that is headquartered in the United Kingdom with offices in the United States, Germany, France and Spain. The company develops and publishes a varied range of titles for all current game platforms in North America, Europe and Asia.9

~~Strategy First~~SILVERSTAR isHOLDINGS ~~headquartered~~LTD in- ~~Montreal Canada and is a worldwide publisher of strategy based interactive entertainment software for the PC.~~ 10-Q

NOTE 9 8. ~~DEBT~~CONVERTIBLE SECURED DEBENTURES

~~Line~~ On October 19, 2006, the Company issued debentures to DKR SoundShore Oasis Holding Fund Ltd. (the “Purchaser”) in the principal amount of ~~Credit~~ $1,400,000 due October 31, 2008 (the “2006 Debenture”) which was extended to April 30, 2010. The 2006 Debenture is convertible at the option of the Purchaser, into shares of common stock at a conversion price of $1.738 per share.

~~In June 2002,~~The ~~the~~ Company ~~obtained~~pays amonthly ~~secured~~interest ~~line~~on ofthe ~~credit~~outstanding ~~facility~~principal ~~for~~amount ~~borrowings up to~~of ~~$1.0 million, which is fully secured by cash balances held in~~ the ~~Company's account.~~2006 ~~This~~Debenture ~~liability~~at ~~is due on demand and has~~ a ~~floating interest~~ rate ~~that is~~per ~~based~~annum onequal to the prime rate ~~minus~~for ~~1.75%.~~the Onapplicable ~~December~~interest ~~31,~~period ~~2006,~~plus ~~the prime rate was 8~~1.255%. ~~The balance outstanding under this line of credit at December 31, 2006, and June 30, 2006 was $735,209 and $647,797 respectively.~~

~~Empire Interactive~~The ~~has~~Purchaser anand ~~expired~~the ~~line~~Company ofamended ~~credit~~the ~~secured~~terms byof ~~its~~the ~~receivables,~~2006 ~~inventory, real~~Debenture ~~property~~in ~~and~~June ~~intangible assets~~2007. AsUnder the terms of ~~December~~the ~~31,~~amendment ~~2006~~there ~~the~~will ~~amount outstanding~~be no amortization of principal under ~~this~~the ~~facility~~2006 ~~was~~Debenture; ~~£1,109,347~~and ~~($2,173,322).~~the ~~The~~2006 ~~line~~Debenture ofwill ~~credit accrues~~be ~~interest~~mandatorily atconvertible anif ~~annual~~the ~~rate~~closing sale price of ~~7.25%.~~the ~~The~~Company’s ~~facility~~common ~~expired~~stock onequals ~~December 31,~~or ~~2006~~exceeds ~~and~~$3.48 ~~its~~per ~~renewal~~share. This mandatory conversion is ~~currently~~subject ~~being~~to ~~negotiated~~volume requirements.

~~Other Debt~~The Company’s obligations under the 2006 Debenture are secured by a lien on certain assets of the Company in favor of the Purchaser, and guaranteed by certain subsidiaries of the Company. In addition, the obligations of the Company under the 2006 Debenture are personally guaranteed by Mr. George Karfunkel. Mr. Karfunkel is compensated in the amount of 5% of the current principal outstanding amount of the 2006 Debenture per annum.

~~Other debt~~On ~~consists~~March of19, a2008, ~~term loan assumed pursuant to~~ the ~~plan~~Company ofissued ~~arrangement related~~ to ~~the~~accredited ~~Company’s~~investors ~~acquisition~~9% ofSecured ~~Strategy~~Convertible ~~First,~~Debentures ~~payable~~ in ~~monthly~~the aggregate principal ~~installments~~ amount of $227,500,000 ~~Canadian~~due ~~plus~~March ~~interest~~19, at2012 an(the ~~annual~~“2008 ~~rate~~Debentures”) ofand ~~the~~warrants ~~National Bank~~to ofpurchase ~~Canada’s~~an ~~prime~~aggregate ~~rate~~of ~~plus~~ 3~~.25%.~~,124,999 ~~The~~shares ~~Bank~~of the Company’s ~~prime~~common ~~rate~~stock, onpar ~~December~~value ~~31, 2006~~$.01 ~~was~~per ~~6%.~~share ~~The~~at ~~loan~~an ~~matures~~exercise inprice ~~April~~of ~~2007~~$1.50 ~~The~~per ~~balance~~share. ~~outstanding~~The asterm of ~~December~~ ~~31,~~the ~~2006~~warrants ~~was~~is ~~$59,834~~five years.

~~NOTE~~The 2008 Debentures are convertible at any time, at the option of the purchasers, into shares of common stock at a conversion price of $1.2026 per share. However, if after the date that a registration statement covering the resale of the shares issuable upon conversion of the 2008 Debentures is effective, the average daily volume weighted average price of the common stock for 30 consecutive trading days 10 exceeds $2.40, ~~CONVERTIBLE~~the ~~SECURED~~Company ~~DEBENTURE~~may require the purchasers to convert all or part of their outstanding 2008 Debentures.

~~On October~~The ~~31,~~value ~~2005,~~of the ~~Company~~warrants ~~consummated~~and athe ~~transaction~~conversion ~~pursuant~~feature toof athe ~~Securities Purchase~~2008 ~~Agreement,~~Debentures ~~dated~~using ~~October~~the ~~21,~~using ~~2005~~the (Black-Scholes option pricing model using the ~~“Purchase~~following ~~Agreement”),~~weighted ~~with~~average ~~DKR SoundShore~~assumptions: ~~Oasis~~risk-free ~~Holding~~interest ~~Fund~~rate ~~Ltd~~of 2.36%, ~~(the~~dividend ~~“Purchaser”).Pursuant~~yields toof ~~the~~0% ~~Purchase Agreement,~~and a volatility factor of the ~~Company~~expected ~~issued~~market toprice of the ~~Purchaser~~Company’s acommon ~~$5,000,000~~stock ~~principal~~of ~~amount Variable~~43.21% ~~Rate~~which ~~Secured~~resulted ~~Convertible~~in ~~Debenture~~the ~~due~~warrants ~~October~~being 31valued at $996,480 ~~2008~~and (the ~~“Debenture”)~~ conversion ~~and~~feature abeing ~~warrant~~valued toat ~~purchase 791~~$621,~~139~~480. ~~shares~~The ofwarrants and the ~~Company’s~~conversion ~~Common Stock~~feature atare anboth ~~exercise~~being ~~price~~amortized ofusing ~~$1.896~~the ~~per~~straight ~~share~~line (method over the ~~“Warrant”).~~term of the 2008 Debenture.

~~Interest accrues~~The onCompany’s ~~the~~obligations ~~principal~~under ~~balance of~~ the ~~note~~2008 atDebentures anare ~~annual~~secured ~~interest~~by ~~rate~~a ~~equal to prime~~lien ~~plus~~on ~~1.5%.~~certain Onassets ~~December~~of ~~31, 2006~~ the ~~interest~~Company ~~rate~~in ~~was~~favor ~~9.75%. The note is convertible into common stock~~ of the ~~Company~~purchasers at(except anEmpire ~~initial~~Interactive ~~conversion~~PLC ~~rate of $1.738~~and ~~per~~Strategy ~~share~~First ~~up to a maximum of 2~~Inc.),~~876,860~~ ~~shares.~~and ~~The~~guaranteed ~~agreement~~by ~~allows for an~~the ~~additional 1,100,403~~ shares toand beassets ~~issued upon the conversion~~ of ~~the debentures~~certain orsubsidiaries ~~exercise~~ of the ~~warrants as a result of either conversion price adjustments or exercise price adjustments~~Company. ~~Based~~In ~~upon~~addition, the ~~closing~~obligations ~~price per share~~ of the Company’s ~~Common~~under ~~Stock~~the on2008 ~~the~~Debenture ~~date~~are ofpersonally ~~issuance,~~guaranteed ~~there~~by ~~was~~Mr. George anKarfunkel. ~~intrinsic~~ Mr. Karfunkel ~~value~~is ~~associated~~compensated ~~with~~in the ~~beneficial~~amount ~~conversion~~of ~~feature~~6% of ~~$124,443, which~~the iscurrent ~~presented~~principal asoutstanding aamount ~~discount~~of on the ~~convertible~~2008 ~~note~~Debenture ~~and~~per ~~amortized over the term of the note~~annum.

The ~~principal~~ ~~amount~~balance of the ~~Debenture~~debentures ~~was~~as ~~to be redeemed at the rate~~ of ~~$185,185 per month,~~December ~~plus accrued and unpaid interest~~31, ~~commencing~~2008 ~~on July 6, 2006~~ and may be paid, at the Company’s option (i) in cash or (ii) in shares of the Company’s Common Stock in an amount not to exceed 10% of the total dollar trading volume of the Common Stock during the 10 trading days immediately prior to the applicable monthly redemption date based on a conversion price equal to 85% of the average of the lowest three trading days based upon the volume weighted average price during the 10 trading days immediately prior to the applicable monthly redemption date. In June ~~2006~~30, ~~the terms of the debenture were amended to require redemption at the rate of $180~~2008,~~000~~ ~~per~~net ~~month commencing on February 1, 2007. The Company has the option, at any time, to redeem some or all~~ of ~~the outstanding~~ ~~Debenture,~~unamortized indiscounts ~~cash,~~was inas an amount equal to the sum of (i) 115% of the principal amount of the Debenture outstanding, plus accrued and unpaid interest and liquidated damages (the “Optional Redemption Amount”). However, the Company may pay up to 15% of the principal amount comprising of a portion of the Optional Redemption Amount in shares of the Company’s Common Stock if certain conditions are satisfied. In May 2006, the Company repaid $1,400,000 of the outstanding principal balance along with an early payment penalty of approximately $210,000. follows:

The Company’s obligations under the Debenture are secured by a lien on all assets of the Company in favor of the Purchaser pursuant to a Security Agreement, dated October 31, 2005, among the Company, all of the subsidiaries of the Company and the Purchaser, and guaranteed by all the subsidiaries of the Company pursuant to a Subsidiary Guarantee, dated October 31, 2005, made by the Company’s subsidiaries in favor of the Purchaser. In addition, the obligations of the Company under the Debenture are personally guaranteed by Mr. George Karfunkel pursuant to a Personal Guarantee, dated October 31, 2005, between Mr. Karfunkel and the Purchaser. Mr. Karfunkel is compensated in the amount of 5% of the current principal outstanding per annum.

	December 31, 2008			June 30, 2008
Principal amount of debentures	$	8,900,000		$	8,900,000
Discounts for beneficial conversion features		(508,433	)		(589,303	)
Discounts for fair value of warrants and options		(823,347	)		(956,060	)
Balance, net of unamortized discounts	$	7,568,220		$	7,354,637
Less current portion		—			—
Long-term portion	$	7,568,220		$	7,354,637

In connection with the convertible note, the Company issued to the holder of the note a five-year warrant to purchase up to 791,139 shares of the Company’s common stock at an exercise price of $1.896 per share. The fair value for these warrants was estimated at the grant date using the Black-Scholes option pricing model using the following weighted average assumptions: risk-free interest rate of 4.50%, dividend yields of 0% and a volatility factor of the expected market price of the Common Stock of 114.80%. Based upon the closing price per share of the Company’s common stock on the date of issuance, the Company estimated the fair value of the warrant and allocated $665,295 of the proceeds from the note to the warrant, which is presented as a discount on the convertible note, net of amortization to be taken over the three-year term of the note using the effective interest method. 10

~~On October~~SILVERSTAR ~~19,~~HOLDINGS ~~2006,~~LTD ~~the~~- Company entered into a Securities Purchase Agreement with DKR SoundShore Oasis Holding Fund Ltd., pursuant to which the Company issued to the Purchaser a Variable Rate Secured Convertible Debenture in the principal amount of $1,400,000 due October 31, 2008. The Company and Purchaser are parties to a prior Securities Purchase Agreement, dated October 21, 2005.10-Q

~~The Debenture~~Scheduled ismaturities ~~convertible~~of ~~at any time after December 19, 2006, at~~ the ~~option of the~~convertible ~~Purchaser,~~debentures ~~into~~as ~~shares~~ of ~~Common Stock at a conversion price of $1.738 per share. As of~~ December 31, ~~2006~~2008 noare debentures have been converted. Based upon the closing price per share of the Company’s Common Stock on the date of issuance, there was an intrinsic value associated with the beneficial conversion feature of $52,378 which is presented as ~~a discount on the convertible note and amortized over the term of the note.~~ follows:

The Company may prepay any portion of the principal amount of the Debenture prior to December 19, 2006 without the prior written consent of the Purchaser for 100% of the principal amount being prepaid plus any accrued but unpaid interest thereon. As of December 31, 2006, no payments have been made.

1 Year or less	$	—-
April 30, 2010		1,400,000
March 19, 2012		7,500,000
Total	$	8,900,000

~~The Company~~Interest ~~shall~~expense ~~pay~~related ~~monthly interest on the outstanding principal amount of the Debenture at a rate per annum equal~~ to the ~~prime~~debentures ~~rate~~amounted ~~for the applicable interest period plus 1.5%. The interest rate for any interest period shall be decreased by 2%~~ to ~~the~~$390,982 ~~extent~~and ~~that~~$78,184 ~~the volume weighted average trading price of the Common Stock~~ for ~~five (5) consecutive trading days immediately prior to such interest period (~~the ~~"Trigger~~six ~~Price")~~months ~~exceeds~~ended ~~the~~December ~~conversion~~31, ~~price~~2008 byand ~~25%~~2007 (and ~~shall~~ be$193,856and ~~decreased~~$14,292 byduring ~~an additional 2% for every successive 25% that~~ the ~~Trigger Price~~quarters ~~exceeds~~ended ~~the~~December ~~then~~31, ~~applicable~~2008 ~~conversion price but in no event shall the interest rate be less than 0%). All overdue accrued~~ and ~~unpaid~~2007, ~~interest to be paid under the Debenture shall entail a late fee at a rate of 18% per annum~~respectively.

~~The principal~~Amortization ~~amount~~ of discounts for the ~~Debenture~~beneficial isconversion ~~redeemable~~features atand ~~the~~warrants ~~rate~~resulted in charges to Amortization of Convertible Debt Discounts and Issuance Costs totaling $63213,~~636~~583 ~~per month~~and $156,308 ~~plus~~during ~~accrued~~the ~~but~~six ~~unpaid~~months ~~interest~~ended December 31, 2008 and ~~liquidated~~2007 ~~damages~~and $106,796 ~~commencing on March~~and 1$29,114 during the quarters ended December 31, 2008 and 2007, respectively. The Company ~~has~~also ~~the~~incurred ~~option,~~loan atcosts ~~any~~of ~~time~~$2,262,311 ~~after~~directly related ~~December~~to 19securing these debentures, ~~2006~~which includes $1, to090,000 ~~redeem~~paid ~~some~~for orpersonal ~~all~~guarantees ofon the ~~then~~ outstanding ~~Debenture,~~balances. inThe ~~cash,~~annual inguarantees anare ~~amount~~ equal to 5% of the ~~sum~~outstanding ofloan ~~(i)~~balance ~~115~~on the 2006 Debentures and 6% of the ~~principal~~2008 ~~amount~~Debentures. The loan costs were originally amortized over the term of the ~~Debenture~~debentures. ~~then outstanding,~~As ~~(ii)~~a ~~accrued~~result ~~but~~of ~~unpaid~~the ~~interest~~amendment ~~and~~to ~~(iii)~~the ~~all~~2006 ~~liquidated~~Debentures ~~damages and~~the ~~other~~remaining ~~amounts~~loan ~~due~~issuance costs are being amortized on a straight line method through April 30, 2010. Loan costs incurred in ~~respect~~connection ofwith the ~~Debenture~~2008 ~~(the~~Debentures ~~"Optional~~are ~~Redemption Amount")~~being ~~(provided,~~amortized ~~however~~on a straight line method through March 19, ~~the~~2012. ~~Company~~The ~~may~~annual ~~pay~~guarantee upfees toare ~~15%~~amortized ofover twelve months. Amortization expenses for the ~~principal amount~~guarantee ~~comprising~~and adebt ~~portion~~issuance ofcosts totaled $339,205 and $398,608 for the ~~Optional~~six ~~Redemption~~months ~~Amount~~ended inDecember ~~shares~~31, ~~of Common~~2008 ~~Stock~~and if2007 ~~certain~~and ~~conditions~~$169,602 ~~are~~and ~~satisfied).~~$94,633 during the quarters ended December 31, 2008 and 2007 respectively.

~~The Company~~Estimated ~~also~~amortization ~~entered~~expense ~~into~~related ~~a Registration Rights Agreement with the Purchaser pursuant~~ to ~~which, unless~~ the ~~Debenture is paid in full on or prior to December 19~~warrants, ~~2006,~~beneficial the Company agreed to prepare and file with the Securities and Exchange Commission within 90 days of the date of the Agreement, a shelf registration statement for the purpose of registering for the resale of 130% of all the shares of Common Stock issuable upon conversion offeature ~~the Debenture~~ and ~~cause~~ ~~such~~costs ~~registration~~related ~~statement~~ to ~~become~~securing ~~effective~~these ~~under~~debentures ~~the~~through ~~Securities Act of~~debt ~~1933~~maturities ~~within~~is ~~150~~as ~~days of the date of the Agreement.~~ follows:

If the registration statement is not filed within 90 days after the date of the Agreement or declared effective within the specified time, then the Company shall pay to the Purchaser certain amounts in cash as liquidated damages. The Company has filed a registration statement in this regard and anticipates it becoming effective within the specified time period.

2009	$	425,772
2010		598,445
2011		522,788
2012		375,227
Total	$	1,922,801

~~The Company’s~~NOTE ~~obligations~~9. ~~under the Agreement~~COMMITMENTS, ~~the~~CONTINGENCIES ~~Debenture~~AND ~~and~~LEGAL the Registration Rights Agreement are subject to a security interest granted by the Company pursuant to that certain Security Agreement dated October 21, 2005, by and among the Company, all of the subsidiaries of the Company and the Purchaser. MATTERS

~~As consideration,~~Other ~~the~~than ~~Company~~as ~~reduced~~set ~~the~~forth ~~exercise~~below, ~~price of~~ the ~~warrants~~Company ~~$.10 to $1.7986~~is ~~per~~not ~~share.~~currently ~~The~~a ~~fair~~party ~~value~~to ~~for~~any ~~the~~material ~~reduction~~legal inproceedings. ~~the~~The ~~exercise~~Company ~~price~~may ~~of these~~from ~~warrants~~time ~~was~~to ~~estimated~~time atbecome ~~the~~involved ~~grant~~in ~~date~~legal ~~using~~proceedings ~~the~~in ~~Black-Scholes option pricing model using~~ the ~~following~~ordinary ~~weighted~~course ~~average assumptions: risk-free interest rate~~ of 4business.~~37%,~~ ~~dividend~~It ~~yields~~may ofnot 0%be ~~and~~successful ain ~~volatility~~defending ~~factor~~these ofor ~~the expected~~other ~~market price of the Common Stock of 106~~claims.~~66%.~~ ~~Based~~Regardless ~~upon the closing price per share~~ of the ~~Company’s common stock on the date of issuance~~outcome, ~~the Company~~litigation ~~estimated~~can ~~the~~result ~~fair~~in ~~value~~substantial ofexpense ~~the warrant exercise price reduction~~ and ~~allocated~~ ~~$10,490~~could ofdivert the ~~proceeds~~efforts ~~from the note to the warrant, which is presented as a discount on the convertible note, net~~ of ~~amortization to be taken over the three-year term of the note using the effective interest method~~management.

~~The balance~~In ofApril 2006, the ~~notes~~First asSouth African subsidiary received a letter from the South African Revenue Service (“SARS”) challenging certain tax treatment of ~~December~~dividends ~~31,~~and ~~2006~~operating loss carry forwards for the years 2002 through 2004. Subsequently SARS issued two tax assessments for approximately $2.9 million. The Company had contended that its South African tax filings were in full compliance with all applicable laws and ~~June~~had ~~30,~~vigorously ~~2006,~~defended ~~net~~its position in this regard. The Company had retained an amount of ~~unamortized~~ ~~discounts~~cash ~~was~~equal asto ~~follows:~~the assessments in South Africa to satisfy any potential liability that may arise.

	December 31, 2006			June 30, 2006
Principal amount of notes	$	5,000,000		$	3,600,000
Discounts for beneficial conversion features		(84,127	)		(60,122	)
Discounts for fair value of warrants and options		(220,157	)		(321,423	)
Balance , net of unamortized discounts	$	4,695,716		$	3,218,455
Less current portion		(2,743,632	)		(900,000	)
Long-term portion	$	1,952,084		$	2,318,455

In May 2007, the Company through an arbitration procedure with SARS reached an agreement whereby SARS agreed in principle to drop the larger of its two assessments. The Company conceded the principle of SARS second assessment. On August 31, 2007, the Company paid approximately $300,000 to SARS in regard to this assessment. The Company is vigorously disputing a further amount of R5,394,708 (approximately $569,700 based on the December 31, 2008 foreign exchange of $.1057 US dollars to one South African Rand) and believes it has strong arguments in this regard based on among other factors, computational errors made by SARS in its assessment. Based on its payments to SARS, the Company has reduced its estimated liability to R 2,216,286 (approximately $235,204) as of December 31, 2008. The Company believes its remaining liability to SARS is lower than this amount; however, in the event its arguments are unsuccessful, it may be forced to increase this liability. A court hearing was held in early December 2008. A ruling on this matter is anticipated shortly.

~~Scheduled maturities of the convertible debentures as of December 31, 2006 and June 30, 2006 were as follows:~~ 11

	December 31, 2006		June 30, 2006
1 Year or less	$	2,743,632	$	900,000
1-2 Years		2,256,368		2,700,000
Total	$	5,000,000	$	3,600,000

SILVERSTAR HOLDINGS LTD - 10-Q

~~Interest expense~~On ~~related~~March to29, ~~the~~2006, ~~notes~~Strategy ~~amounted~~First entered into an agreement to acquire certain intellectual property rights for $~~185~~200,~~854~~000 in cash and the issuance of options to acquire 100,000 shares of the Company’s common stock at an exercise price of $~~101~~1.50. The options vest when net sales,~~500~~ ~~during~~as defined in the ~~six~~ purchase agreement, exceed $750,000 and ~~three~~expire ~~months~~on ~~ending~~December 31, 2008. The agreement also provides for commissions of twenty-five percent of net revenues in the event they exceed $500,000 through December 31, ~~2006~~2008. In August 2008, ~~respectively~~Strategy First entered into an early termination of this agreement for a net payment of $50,000. The Company does not anticipate any further payments or exercise of options under this agreement.

~~Amortization of~~In ~~discounts~~August ~~for~~2007, ~~the~~Empire ~~beneficial~~was ~~conversion~~served ~~features~~with ~~and~~a ~~warrant~~lawsuit ~~resulted~~brought ~~in charges~~by toa ~~Amortization~~former ofdistributor ~~Convertible~~in ~~Debt~~Portugal. ~~Discounts~~The ~~and~~lawsuit ~~Issuance~~claims ~~Costs totaling~~that ~~$140,129~~Empire ~~during~~had ~~the~~no ~~six~~right ~~months~~to ~~ended~~utilize ~~December~~other ~~31,~~distributors ~~2006.~~in ~~The~~Portugal ~~Company also~~and ~~incurred~~seeks ~~loan costs of $897~~630,~~084~~000 ~~directly~~euros ~~related~~in todamages. ~~securing~~Empire ~~these~~believes ~~notes, which~~this ~~included~~claim ~~$500,000,~~has ~~($250,000~~no ~~annually)~~merit ~~paid~~as ~~for~~its adistribution ~~personal~~agreements ~~guarantee on the~~are ~~outstanding~~tailored ~~balances.~~for ~~The~~individual ~~loan~~products ~~costs~~only ~~are~~and ~~being~~do ~~amortized~~not ~~over~~give ~~the~~blanket ~~term of the~~distribution ~~notes~~rights ~~while~~to ~~the~~outside ~~guarantee~~distributors. ~~fees~~Empire has ofmoved ~~$500,000~~to ~~are~~dismiss ~~being amortized at~~ the ~~rate of $250,000 per year~~claim. ~~Amortization~~A ~~expenses~~preliminary ofhearing ~~$190,403~~was ~~are~~held ~~included~~ in ~~Amortization~~ ofNovember ~~Convertible~~2008 ~~Debt Discounts~~ and ~~Issuance~~there ~~Costs~~has ~~during~~been ~~the~~nothing ~~six months~~further ~~ended~~since ~~December~~that ~~31, 2006~~time.

~~Estimated amortization~~On ~~expense~~December ~~related~~31, to2008, ~~the~~Empire ~~warrants~~owed approximately $524,044 ~~beneficial~~(£361,934) ~~conversion~~for ~~feature~~UK payroll taxes of which $414, ~~and costs~~269 ~~related~~(£286,117) towas ~~securing~~past ~~these~~due. ~~notes~~As of December 31, 2008, the interest rate in effect for late tax payments was 5.50%. Interest is automatically charged for the ~~rest~~period offollowing ~~fiscal~~April ~~2007~~19, ~~through~~2008 ~~debt~~on the amount that was still due at that date. In addition, the UK tax authorities have the power to ~~maturities~~ charge isthis asrate ~~follows:~~of interest on overdue payroll taxes in respect of taxes arising after March 31, 2008; however in practice, this is rare.

2007	$	334,869
2008		302,163
2009		12,461
Total	$	649,493

On June 30, 2008, the Company and Strategy First, Inc. entered into a settlement and termination agreement with 3A Entertainment, Inc. and Akella whereby we will receive a sum of $1.1 million paid over ten months beginning August 1, 2008, in lieu of claims that we might have had against Akella and 3A Entertainment. Additionally, should these settlement payments be made in a timely fashion, Akella and 3A Entertainment have the option to acquire certain intellectual property rights for the Jagged Alliance and Disciples franchises for an additional $100,000. The parties have also agreed to enter into further distribution agreements for these properties going forward. Due to the uncertainty of payment of these amounts, the Company will record the settlement payments as they are received. The Company through December 31, 2008 has received all scheduled payments. Additionally, Akella and 3A Entertainment have exercised their option to acquire certain intellectual property rights for the Disciples franchise.

~~NOTE 11~~In August 2008, the Company’s subsidiary, Silverstar Acquisitions, Ltd. ~~COMMITMENTS~~, ~~CONTINGENCIES~~received ~~AND~~a ~~LEGAL~~demand notice from Ian Higgins and Simon Jeffrey for payment of approximately £180,000 ($340,000) in additional punitive interest in regards to the payment of their loan notes which were fully discharged in November 2007. The claim relates to penalty interest for an alleged failure to make timely payment on the ~~MATTERS~~ amounts owed to them. The Company disputes the fact that these payments were late. No legal papers have been received in this matter. However, should the Company need to respond to a legal claim, it will vigorously defend itself in this regard.

~~Legal Matters~~NOTE 10. NEW ACCOUNTING PRONOUNCEMENTS

In ~~April 2006,~~ ~~our~~September ~~subsidiary~~2006, ~~First South African Holdings, received a letter from~~ the ~~South~~ ~~African~~FASB ~~Revenue~~issued ~~Service~~SFAS ~~(“SARS”)~~No. ~~challenging~~157, ~~certain~~Fair ~~tax~~Value ~~treatment~~Measures. ~~of dividends~~SFAS ~~and~~No. ~~operating~~157 ~~loss~~defines ~~carry~~fair ~~forwards~~value, ~~for~~establishes ~~the years 2002 through 2004. Subsequently SARS issued~~ a ~~tax~~framework ~~assessment~~ for ~~approximately~~measuring ~~$3.2~~fair ~~million.~~value ~~The Company believes that its South African tax filings are in full compliance with all applicable laws~~ and isenhances ~~vigorously~~disclosures ~~defending~~about ~~its~~fair ~~position~~value inmeasures ~~this~~required ~~regard. However,~~under ~~until~~other ~~such~~accounting ~~time as these issues are resolved~~pronouncements, ~~the~~but ~~Company~~does ~~will~~not ~~retain an~~change ~~amount~~existing ofguidance ~~cash~~as ~~equal~~ to ~~the~~whether ~~assessment~~or innot ~~South~~an ~~Africa~~instrument tois ~~satisfy~~carried ~~any potential~~at ~~liability~~fair ~~that~~value. ~~may~~SFAS ~~arise~~No. ~~The~~157 ~~Company~~is ~~has~~effective ~~recorded~~for anfiscal ~~estimated liability~~years ofbeginning ~~approximately~~after November ~~$618~~15,~~000 in this regard~~ ~~but may be forced to increase this amount should it receive adverse information as it continues its appeal of the SARS assessment~~2007.

~~In January~~Fair ~~2006,~~value weis ~~brought~~defined under SFAS No. 157 as the exchange price that would be received for an ~~action~~asset ~~against~~or ~~JoWood~~paid ~~Software~~to ~~Productions~~transfer ~~AG seeking~~a ~~damages~~liability (an exit price) in the ~~amount~~principal ofor ~~approximately~~most ~~$850,000~~advantageous market for ~~expenses~~the ~~incurred~~ asset or liability in ~~connection~~ ~~with~~an ~~our~~orderly ~~unsuccessful~~transaction ~~acquisition~~between ofmarket ~~shares~~participants ofon ~~JoWood~~the measurement date. ~~The~~Valuation ~~case is being~~techniques ~~heard~~used into ~~the~~measure ~~Vienna~~fair ~~Commercial~~value ~~Court~~under inSFAS ~~Austria~~No. A157 ~~judgment~~must ismaximize ~~anticipated~~the use of observable inputs ~~within~~ and minimize the ~~next~~use ~~few~~of ~~months~~unobservable inputs. The standard describes how to measure fair value based on a three-level hierarchy of inputs, of which the first two are considered observable and the last unobservable.

~~In March 2006~~• anLevel ~~action~~1 ~~was~~– ~~brought~~Quoted ~~against~~prices ~~Empire~~in ~~Interactive,~~active ~~PLC~~markets ~~and~~for ~~Empire Interactive~~identical ~~Inc.~~assets byor ~~a financial advisory firm seeking damages of approximately $700,000 relating to an alleged breach of a business development agreement with Empire Interactive, PLC~~liabilities. ~~On February 13, 2007, the case was settled with Empire agreeing to pay an amount of $230,000 due on April 19, 2007~~

~~In June 2006,~~• ~~Empire~~Level ~~Interactive,~~2 ~~Inc.~~– ~~commenced~~Inputs ~~litigation~~other ~~against~~than ~~Take~~level1 ~~Two~~that ~~Interactive Inc.~~are ~~(“Take~~observable, ~~Two”)~~either indirectly ~~regard~~or toindirectly, ~~the~~such ~~accounting~~as ~~and~~quoted ~~reporting~~prices offor ~~sales~~similar ofassets ~~various products~~or byliabilities; ~~Take~~quoted ~~Two.~~prices Toin ~~this~~markets ~~point,~~that ~~Empire~~are ~~has~~not ~~received~~active; ~~payments~~or ~~of approximately~~other ~~$1,416,000~~inputs ~~from~~that ~~Take~~are ~~Two.~~observable ~~Empire~~or ~~believes~~can ~~that~~be ~~there~~corroborated ~~are~~by ~~still significant~~observable ~~amounts~~market ~~due~~data ~~from~~for ~~Take~~substantially ~~Two~~the ~~and~~full ~~continues~~term toof ~~pursue its claims in~~ the ~~London~~ ~~commercial~~assets ~~courts~~or liabilities.

~~Commitments and Contingencies~~ 12

~~During the~~SILVERSTAR ~~first~~HOLDINGS ~~quarter~~LTD of- fiscal 2006, the Company entered into agreements with two of Strategy First's game developers to guarantee certain of their royalty payments. The guarantee is limited to $100,000. Royalties owed to these developers as of December 31, 2006 are less than $30,000.10-Q

~~The Company~~• ~~anticipates~~Level ~~that~~3 ~~Strategy~~– ~~First~~Unobservable ~~will~~inputs ~~pay~~that ~~the~~are ~~royalties~~supported ~~due~~by tolittle ~~its developers~~or ~~when~~no ~~earned~~market activity and ~~does~~that ~~not~~are ~~anticipate~~significant ~~having~~ to ~~make~~the ~~any~~fair ~~payments under these~~value ~~guarantees~~of the assets or liabilities.

~~On March 29,~~SFAS ~~2006,~~is ~~Strategy~~effective ~~First entered into an agreement to acquire certain intellectual property rights~~ for ~~$200,000 in cash and~~ the ~~issuance of options to acquire 100,000 shares of the~~ Company’s ~~common~~fiscal ~~stock~~year atended anJune ~~exercise~~30, ~~price of $1~~2009.~~50.~~ The ~~options~~Company ~~vest~~adopted ~~when net sales, as defined in~~ the ~~purchase~~provisions ~~agreement, exceed~~of ~~$750,000~~SFAS ~~and~~No. ~~expire~~157 oneffective ~~December~~July 311, 2008. The ~~agreement~~adoption ~~also provides for commissions~~ of ~~twenty-five~~SFAS ~~percent of net revenues in the event they exceed $500,000 through December 31, 2008~~No. As157 ofdid ~~December~~not ~~31,~~have ~~2006~~a ~~net~~material ~~revenues~~impact ~~earned under~~on ~~this~~our ~~agreement~~fair ~~were~~value ~~approximately $196,000~~measurements.

~~NOTE 12~~In February 2008 the FASB issued FASB Staff Position No. ~~NEW~~157-2 ~~ACCOUNTING~~which ~~PRONOUNCEMENTS~~provides for a one year deferral of the effective date of SFAS 157 for non- financial assets and non- financial liabilities, except for those that are recognized or disclosed in the financial statements at fair value at least annually.

~~In September~~On ~~2006~~February 15, 2007, the ~~Securities~~FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and ~~Exchange~~Financial ~~Commission~~Liabilities ~~issued~~– ~~Staff~~including ~~Accounting Bulletin~~an Amendment of FASB Statement No. ~~108,~~115” ~~Considering~~(“FASB 159”). This standard permits an entity to measure financial instruments and certain other items at the ~~Effects~~estimated fair value. Most of ~~Prior~~the ~~Year~~provisions ~~Misstatements~~of ~~when Quantifying~~SFAS ~~Misstatements~~No. in159 ~~Current~~are ~~Year~~elective; ~~Financial~~however, ~~Statements~~the amendment (to FASB No. 15, “~~SAB~~Accounting ~~108~~for Certain Investments in Debt and Equity Securities,”). ~~SAB 108~~applies ~~requires~~to all entities that inown ~~evaluating~~trading ~~the~~and ~~effects~~available-for-sale securities. The fair value option created by SFAS 159 permits an entity to measure eligible items at fair value as of ~~prior~~specified ~~year~~election ~~errors~~dates. onThe ~~current year financial~~fair ~~statements~~value option (a) may generally be applied instrument by instrument, ~~SEC~~(b) ~~registrants~~is irrevocable unless a new election date occurs, and (c) must ~~consider~~be applied to the ~~effect~~entire instrument and not to only a portion of the ~~errors on both~~instrument. ~~the~~SFAS ~~current~~159 ~~year~~is ~~statement~~effective as of ~~operations~~the ~~and~~beginning of the ~~magnitude~~first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the ~~errors on~~ beginning of the ~~current~~previous fiscal year ~~balance~~provided ~~sheet.~~that Asthe aentity ~~result,~~(i) ~~SAB~~makes ~~108~~that ~~could~~choice ~~require~~in ~~prior~~the first 120 days of that year , (ii) has not yet issued financial statements tofor beany ~~corrected~~interim ~~for~~period ~~errors~~of ~~that~~such ~~had~~year, ~~previously~~and ~~been~~(iii) ~~deemed immaterial~~elects to apply the provisions of FASB 157. ~~SAB~~SFAS ~~108~~No. 159 is effective for the Company’s fiscal ~~years~~year ending ~~after~~June ~~November 15~~30, ~~2006~~ 2009. The Company ~~has~~adopted ~~not~~the ~~determined~~provision ~~the~~of ~~impact~~SFAS ~~that~~No. ~~this~~159 ~~standard~~effective ~~will~~July 1, 2008. The adoption of SFAS No. 159 did not have ~~on its~~ ~~financial~~a ~~position~~material orimpact ~~results~~on ofour ~~operations~~condensed consolidated financial statements.

In ~~July 2006~~ December 2007, the FASB issued ~~FASB~~SFAS ~~Interpretation~~ No. 48141R, ~~“Accounting~~Business ~~for Uncertainty~~Combinations, inor ~~Income~~SFAS ~~Taxes,~~141R. anSFAS ~~interpretation~~141R establishes ofprinciples ~~FASB~~and ~~Statement~~requirements ~~No.~~for ~~109.”~~how ~~This Interpretation~~the ~~prescribes~~acquirer of a ~~recognition~~business ~~threshold~~recognizes and ~~measurement~~measures ~~attribute for the~~in its financial ~~statement~~statements ~~recognition~~the ~~and~~identifiable ~~measurement~~assets ofacquired, athe ~~tax~~liabilities ~~position~~assumed, ~~taken or expected~~and toany benon-controlling ~~taken~~interest in athe ~~tax return~~acquiree. ~~This~~SFAS ~~Interpretation~~141R also provides guidance for recognizing and measuring on the ~~derecognition,~~goodwill ~~classification,~~acquired ~~interest~~in the business combination and ~~penalties,~~determines ~~accounting~~what ininformation ~~interim periods,~~to ~~disclosure,~~disclose to enable users of the financial statements to evaluate the nature and ~~transition~~financial effects of the business combination. The ~~Interpretation~~provisions isof SFAS 141R are effective for financial statements issued for fiscal years beginning after December 15, ~~2006~~2008. The Company ~~has~~is ~~not~~currently ~~yet~~assessing ~~analyzed~~ the ~~effect,~~financial ifimpact ~~any,~~of ~~this~~SFAS ~~interpretation may have~~ 141R on its consolidated financial ~~condition, results of operations, cash flows or disclosures~~statements.

In ~~September~~ ~~2006~~December 2007, the FASB issued SFAS 160, Non-controlling Interests in Consolidated Financial Statements — An Amendment of ARB No. 51. ~~157~~SFAS 160 amends Accounting Research Bulletin No. 51, “~~Fair~~Consolidated ~~Value~~Financial ~~Measurements.~~Statements,” ~~This Statement~~to ~~defines~~establish ~~fair~~accounting ~~value,~~and ~~establishes~~reporting standards for the non-controlling interest in a ~~framework~~subsidiary and for ~~measuring~~the ~~fair~~deconsolidation ~~value~~of a subsidiary. This ~~and~~ statement ~~expands~~also ~~disclosure~~amends ~~about~~certain ~~fair~~of ~~value~~ARB ~~measurements~~51’s consolidation procedures for consistency with the requirements of SFAS 141R. In addition, SFAS 160 also includes expanded disclosure requirements regarding the interests of the parent and isits ~~effective~~non-controlling ~~for financial~~interest. ~~statements~~The ~~issued~~provisions of SFAS 160 are effective for fiscal years ~~beginning~~ after ~~November~~December 15, ~~2007, and~~2008. ~~interim~~Earlier ~~periods~~adoption ~~within~~is ~~those fiscal years~~prohibited. The Company is currently ~~evaluating~~ ~~the~~assessing ~~effect that~~ the ~~adoption~~financial impact of ~~this~~SFAS ~~Statement~~160 ~~will have~~ on ~~its~~ the consolidated ~~results of operations and~~ financial ~~condition~~ statements.

In ~~February~~ ~~2006~~March 2008, the FASB issued SFAS ~~No. 155~~161, ~~“Accounting~~Disclosures ~~for~~about ~~Certain~~Derivative ~~Hybrid Financial~~ Instruments, and Hedging Activities—an amendment of FASB ~~Statements~~Statement No. 133. SFAS 161 amends SFAS 133 and ~~140~~changes the disclosure requirements for derivative instruments and hedging activities.” ~~This statement~~Entities ~~permits~~are ~~fair~~required ~~value~~to ~~remeasurement~~provide ~~for~~enhanced ~~any~~disclosures ~~hybrid~~about ~~financial~~(a) ~~instrument that~~how ~~contains~~and why an ~~embedded~~entity uses derivative ~~that~~instruments, ~~otherwise~~(b) ~~would~~how ~~require bifurcation,~~derivative instruments and ~~eliminates~~related ahedged ~~restriction~~items onare ~~the~~accounted ~~passive~~for under Statement 133 and its related interpretations, and (c) how derivative instruments ~~that~~and ~~a qualifying~~related ~~special-purpose~~hedged items affect an entity’s ~~(SPE)~~financial ~~may~~position, ~~hold~~financial performance, and cash flows. The ~~statement~~Statement is effective for financial statements issued for fiscal years and interim periods beginning after ~~September~~November 15, ~~2006.~~2008, ~~The~~with ~~Company~~early ~~does~~application ~~not~~encouraged. ~~believe this~~The ~~standard~~Company ~~will~~is ~~have~~currently aassessing ~~material~~the ~~effect~~financial onimpact ~~its~~of ~~financial~~SFAS ~~position~~161 ~~or results~~on of the ~~operations~~consolidated statements.

In June 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections.” SFAS No. 154 replaces Accounting Principles Board Opinion (“APB”) No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements. Among other changes, SFAS No. 154 requires that a voluntary change in accounting principle be applied retroactively with all prior period financial statements presented on the basis of the new accounting principle, unless it is impracticable to do so. SFAS No. 154 also provides that (1) a change in method of depreciating or amortizing a long-lived non-financial asset must be accounted for as a change in estimate (prospectively) that was affected by a change in accounting principle, and (2) correction of errors in previously issued financial statements should be termed a "restatement." The new standard is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. The adoption of SFAS No. 154 did not have an effect on the Company’s financial position or results of operations. 13

~~ITEM 2~~SILVERSTAR ~~MANAGEMENT’S~~HOLDINGS ~~DISCUSSION~~LTD ~~AND~~- ~~ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~10-Q

In May 2008, the FASB issued SAFS No. 162, The Hierarchy of Generally Accepted accounting Principles. The current GAAP hierarchy as set forth in the American Institutes of Certified Public Accountants (AICPA) Statement on Auditing Standards No.60, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles, has been criticized because (1) it is directed to the auditor rather ~~following~~ than ~~discussion~~the entity (2) it is complex and (3) it ranks FASB Statements of Financial Accounting Concepts. The FASB believes that the GAAP hierarchy should be ~~read~~directed into ~~conjunction~~entities ~~with~~because ~~our~~it ~~condensed consolidated~~is the entity (not the auditor) that is responsible for selecting accounting principles for financial statements ~~and~~that are presented in conformity with GAAP. Accordingly, the ~~related~~FASB ~~notes~~concluded ~~included~~that ~~therein~~the GAAP hierarchy should reside in the accounting literature established by the FASB and is issuing SFAS to ~~our Annual~~ achieve ~~Report~~that onresult. ~~Form~~SFAS ~~10-K~~161 ~~for~~is effective 60 days following the ~~year~~SEC’s ~~ended~~approval ~~June~~of 30the Public Company Accounting Oversight Board amendments to AU Section 411, ~~2006~~The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. The Company is currently reviewing the provisions of SFAS162 to determine the impact, if any, on our consolidated financial statements.

~~This Management’s~~NOTE ~~Discussion and Analysis of Financial Condition and Results of Operations include forward-looking statements~~11. WeSUBSEQUENT have based these forward-looking statements on our current plans, expectations and beliefs about future events. Actual results could differ materially because of factors discussed in “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended June 30, 2006. EVENT

On February 18, 2009, Empire Interactive Europe, Ltd. was informed that its credit insurance claim relating to the bankruptcy of Entertainment UK in the amount of approximately £370,000 had been rejected by Euler Hermes. Aon Limited, Empire’s representing broker has submitted an appeal of this decision. There can be no assurance that this appeal will be accepted and should the decision stand, the Company will be forced to realize this amount as an additional loss as a result of the Entertainment UK bankruptcy.

SILVERSTAR HOLDINGS LTD - 10-Q

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the Company’s condensed consolidated financial statements and the related notes included therein and the Company’s Annual Report on Form 10-K for the year ended June 30, 2008.

Background and History

We were incorporated in September 1995. Our business plan is to actively ~~pursue acquisitions~~manage ~~fitting~~and agrow ~~pre~~our ~~defined~~presence ~~investment~~in ~~strategy.~~the ~~Currently~~interactive ~~our~~software ~~strategy focuses~~entertainment onindustry ~~the~~both ~~following:~~organically and through acquisitions.

•We ~~acquiring~~sold ~~controlling~~our ~~stakes~~last inremaining ~~high~~South ~~quality~~African ~~electronic~~operations ~~entertainment~~in ~~software~~November ~~businesses~~2000 ~~with~~although ~~strong~~we ~~management~~still ~~teams~~have significant assets that are ~~positioned~~denominated in South African Rand. The assets include cash and notes receivables. Currently we do not have a financial hedging program to ~~use~~protect ~~technology~~against the depreciation of the South African Rand against the US dollar and, ~~Internet~~therefore, ~~related~~as ~~platforms~~long as we hold assets denominated in South African Rand we will continue to ~~fuel~~record ~~above~~income ~~average~~statement ~~growth;~~gains or losses to the extent that the South African Rand’s value fluctuates relative to the US dollar.

•On ~~Investing~~April in21, ~~companies~~2005, ~~that~~we ~~show~~acquired anStrategy ~~ability~~First, toa ~~contribute,~~leading inworldwide ~~the~~publisher ~~short~~of toentertainment ~~medium~~software ~~term,~~for tothe ~~earnings~~PC. ~~per~~We ~~share~~acquired Strategy First through ~~operating~~the ~~profit~~approval orand ~~capital~~jurisdiction ~~appreciation;~~of ~~and~~the Montreal bankruptcy court.

•On ~~operating~~December in4, ~~partnership~~2006, ~~with~~we ~~committed,~~announced ~~incentivised,~~that ~~entrepreneurial~~we ~~management~~had ~~who~~achieved ~~show~~more ~~the~~than ~~vision~~90% ~~and~~acceptance ~~ability~~of our offer to ~~grow~~acquire ~~their~~the ~~businesses~~shares ~~into~~of ~~industry~~Empire. orBased ~~niche~~on ~~leaders~~these acceptances, we announced a formal closing of the offer to Empire shareholders effective December 1, 2006.

~~We sold our last remaining South African operations in November 2000. We still have significant assets that are denominated in South African Rand.~~ The ~~assets include~~current ~~cash~~global ~~and~~economic ~~notes~~crisis ~~receivables.~~has ~~Currently~~impacted ~~we do not have a financial hedging program to protect against~~ the depreciation of the SA Rand against the US dollar and, therefore, as long as we hold assets in South Africa we will continue to record income statement gains or losses to the extent that the RandCompany’s ~~value fluctuates~~operations ~~relative~~in toa ~~the~~number USof ~~dollar.~~ ways:

On In November 172008, ~~2000~~one of our largest customers, weEntertainment ~~acquired~~UK, ~~all~~was ofplaced ~~the~~under ~~assets~~bankruptcy ~~and~~administration ~~certain~~in ~~liabilities~~the ~~of Fantasy~~United ~~Sports~~Kingdom. ~~from~~This ~~GoRacing~~was ~~Interactive~~caused ~~Services,~~by ~~Inc.~~the ~~Founded~~failure inof ~~1993,~~its ~~Fantasy Sports~~parent ~~operates~~company, ~~the~~Woolworths, ~~fantasycup.com~~PLC, ~~website~~a ~~and~~large ~~specializes~~retailer inwhich ~~subscription based~~failed ~~NASCAR,~~as ~~college~~a ~~football~~direct ~~and~~consequence ~~other~~of ~~fantasy~~the ~~sports~~current ~~games~~economic crisis. OnAs ~~April~~a 7result, ~~2006,~~ we ~~disposed~~have taken a charge of ~~substantially~~approximately ~~all~~$480,000 ~~the~~to ~~assets~~reflect ~~and~~the ~~liabilities~~uncollectable ofdebt ~~Fantasy~~associated ~~Sports.~~with this customer.

~~On April 21,~~US ~~2005,~~retailers wein ~~acquired~~particular ~~Strategy~~are ~~First~~being ~~Inc.~~very ~~(www.strategyfirst.com),~~cautious ain ~~leading worldwide~~placing ~~publisher~~orders ~~of entertainment software~~ for ~~the~~inventory ~~PC.~~purposes Weand ~~acquired~~ the ~~company~~ ~~through~~Company ~~the~~is ~~jurisdiction~~finding ofthat ~~the~~smaller ~~Montreal~~orders ~~bankruptcy~~are ~~court.~~being ~~Pursuant to the~~placed ~~approved~~but ~~plan~~on ofa ~~arrangement,~~more wefrequent ~~paid~~basis. ~~cash~~The ~~consideration~~Company tois ~~the~~also ~~creditors of Strategy~~experiencing ~~First~~margin ofstrain ~~$609,000;~~as weretailers ~~issued~~both ~~377,000~~in ~~shares~~the ofUS ~~our common stock; warrants to purchase 200,000 shares of our common stock;~~ and ~~assumed approximately~~internationally ~~$400,000~~are inpushing ~~existing~~to ~~bank~~lower ~~debt, as well as contingent consideration based on~~ the ~~future~~sales ~~profitability~~point of ~~Strategy~~game ~~First.~~products ~~Founded~~ in ~~1990,~~ ~~Strategy~~all ~~First publishes software games primarily for the PC platform~~segments. ~~Some of its popular games include O.R.B, the Disciples franchise, Sacred Lands, Kohan: Immortal Sovereigns, Steel Beasts, Galactic Civilizations, and the Jagged Alliance franchise.~~

~~On October~~While ~~31,~~consumer ~~2005,~~demand weseems ~~consummated a transaction pursuant~~ to ahave ~~Securities~~held ~~Purchase Agreement,~~up ~~dated~~over ~~October 21, 2005 (~~the ~~“Purchase~~Christmas ~~Agreement”)~~period, ~~with~~the ~~DKR SoundShore~~Company ~~Oasis~~is ~~Holding~~finding ~~Fund~~that ~~Ltd.~~its ~~(the~~distributors ~~“Purchaser”).Pursuant~~and toother ~~the~~customers ~~Purchase Agreement,~~are wedelaying ~~issued~~payments tofor ~~the~~goods ~~Purchaser a $5~~and,~~000,000~~ ~~principal~~in ~~amount~~many ~~Variable Rate Secured Convertible Debenture due October 31~~cases, ~~2008~~seeking ~~(the~~trade ~~“Debenture”)~~ and ~~a warrant~~marketing tocredits ~~purchase~~in ~~791,139~~a ~~shares~~far ofmore ~~the~~rapid ~~our~~and ~~common~~aggressive ~~stock~~manner atthan ~~an exercise price of $1~~previously.~~896 per share (the “Warrant”).~~

~~In May 2006,~~There ~~the~~have ~~Company~~been ~~repaid~~significant ~~$1,400,000~~fluctuations ofin ~~the~~global ~~outstanding~~currency ~~principal balance along with an early payment penalty of approximately $210,000~~rates. OnIn ~~October 19~~particular, ~~2006,~~ the ~~Company~~British ~~entered~~pound ~~into~~depreciated arapidly ~~Securities~~against ~~Purchase~~both ~~Agreement with DKR SoundShore Oasis Holding Fund Ltd., pursuant to which~~ the ~~Company~~US ~~issued~~dollar toand the ~~Purchaser a Variable~~euro ~~Rate~~during ~~Secured Convertible Debenture in~~ the ~~principal~~quarter ~~amount~~ended ~~of $1,400,000~~December ~~due October~~ 31, 2008. ~~The~~This ~~Company~~depreciation ~~and~~has ~~Purchaser~~also ~~are~~led ~~parties~~ to ~~a prior~~margin ~~Securities~~contraction ~~Purchase~~at ~~Agreement, dated October 21, 2005~~Empire.

~~On December~~There 4,is ~~2006,~~no ~~the~~consensus ~~Company~~as ~~announced~~to ~~that~~when itthe ~~had~~current ~~achieved~~global ~~more~~down ~~than~~turn ~~90% acceptance~~will ofease ~~its~~or ~~offer to acquire the shares of Empire Interactive PLC~~end. ~~Based on~~As ~~these~~a ~~acceptances~~result, ~~the~~there ~~Company~~can ~~announced~~be ano ~~formal~~guarantee ~~closing~~that of the ~~officer to Empire~~factors ~~shareholders~~mentioned ~~effective~~above ~~December~~will 1,not ~~2006.~~continue ~~The~~or ~~Company~~intensify ~~paid~~in ~~consideration to~~ the ~~shareholders~~remainder asof ~~follows:~~2009 ~~approximately~~nor ~~$6.8~~is ~~million~~there ~~paid~~any oncertainty ~~closing; an additional~~that ~~$5.1~~there ~~million~~will innot ~~loan~~be ~~notes payable October 31, 2007; and~~ further ~~contingent~~ ~~consideration~~negative ~~based~~business onconsequences ~~Empire’s~~as ~~EBIDTA~~a ~~for~~result ~~the 12 months ended June 30, 2007. Founded in 1989, Empire develops and publishes software games for all game platforms. Some~~ of ~~its popular games include~~ the ~~FlatOut~~ongoing ~~franchise,~~economic ~~the Ford Racing franchise, Big Mutha Truckers, Taito Legends, Starsky & Hutch, Starship Troopers, and International Cricket Captain~~crisis.

~~Quarter Ended December 31, 2006 As Compared to Quarter Ended December 31, 2005~~15

~~All financial~~SILVERSTAR ~~data~~HOLDINGS inLTD ~~the~~- ~~following discussion and analysis included the results of operations of Empire Interactive PLC for the month of December 2006 only.~~10-Q

Three Months Ended December 31, 2008 As Compared to the Three Months

Ended December 31, 2007

Revenues

~~Net revenues~~Revenues ~~increased~~for the three months ended December 31, 2008 totaled $8.718 million compared to $210.797 million for the three months ended December 31,~~961~~ 2007,~~000~~ asa ~~compared~~decrease toof $~~983~~2.079 million,~~000~~ or -19.26%. This decrease was primarily the result of a decrease in Empire’s revenues from $10.219 million for the ~~comparable~~three months ended December 31, 2007 to $8.318 million for the three months ended December 31, 2008 which ~~quarter~~ was mainly caused by the depreciation of the ~~previous~~British ~~year~~pound against the US dollar. ~~For~~During the ~~period~~three months ended December 31, ~~Empire~~2008, ~~Interactive’s~~the ~~revenues~~average ~~were~~ exchange rate of the British pound was $1.58 as compared to $2~~,041,000~~.00 ~~while~~during the comparable period in 2007. Strategy First’s ~~revenues~~revenue ~~were~~decreased by approximately $~~920~~178,000 from approximately $578,000 during the three months ended December 31, 2007 to approximately $400,000 for the three months ended December 31, 2008, which was primarily due to lower retail sales. Empire’s revenue is derived primarily from sales of console games and PC games while Strategy First solely sells PC games.

Cost of Sales:

~~Cost~~ The cost of sales was $~~1,252,000~~5.420 inmillion during the ~~second~~three ~~fiscal~~months ~~quarter~~ended ~~2007~~December 31, 2008 or 4262.2% of total revenues. ~~Cost~~For ofthe ~~sales~~comparable ~~for~~quarter ~~Empire~~of ~~Interactive~~the ~~was~~previous ~~$968~~year,~~000~~ ~~or 47.4% while~~ cost of sales ~~for Strategy First~~ was $~~284,000~~4.218 million or 3039.91% of revenues. ~~For~~Empire’s ~~the~~cost ~~quarter~~of ~~ending December~~sales ~~31,~~increased ~~2005,~~approximately $1.316 million while cost of sales ~~was~~at Strategy First decreased approximately $~~148~~114,000. orThe ~~15.1%.~~higher ~~This~~percentage ~~increase~~of cost of sales is primarily due to the ~~result~~increased sales of Nintendo DS games which carry lower gross margins ~~for~~than Empire’s other console ~~games~~or PC products and higher markdowns on products sold through the retail channel. Additionally, ~~which~~the ~~make~~British up pound depreciated by approximately 18% against the ~~majority~~ ofeuro ~~Empire’s~~during ~~sales~~the three months ended December 31, 2008 as ~~opposed~~compared to PCdepreciation ~~products.~~against Inthe ~~2005~~euro aof ~~significant portion~~approximately of5% ~~Strategy~~in ~~First~~the comparable quarter in the previous year. Since Empire’s ~~sales~~European ~~were~~cost ~~generated~~of ~~through~~goods is ~~foreign~~priced ~~royalty~~in euros and it makes substantial sales ~~which~~ ~~had~~in nothe ~~associated~~UK, this currency depreciation directly impacted its gross margins. The cost of ~~sales~~goods sold consists primarily of the actual tangible costs of the product along with any labor and overhead costs.

Development ~~Costs~~ and Royalties:

Development ~~costs~~ and ~~royalties~~royalty ~~were~~costs decreased $~~980,000~~.396 inmillion for the ~~second~~three ~~fiscal~~months ~~quarter~~ended ~~2007~~December 31, or2008 33to $.1% 420 million as compared to $.816 million in the comparable quarter of ~~total~~ ~~revenues~~the previous year. ~~Development~~Empire’s ~~Costs~~development and ~~royalties~~royalty ~~for~~costs ~~Empire~~decreased ~~Interactive~~by ~~totaled~~ $~~872,000~~.233 ormillion 42as compared to the same quarter in the previous year primarily due to a change in mix of products sold and the strengthening of the US dollar against the British pound.~~7%.~~ ~~Royalty~~Development and royalties costs ~~for~~incurred by Strategy First ~~were~~also ~~$116,000~~decreased orby 12$.~~6% as compared~~163 million primarily due to ~~$326,000~~decreased orsales ~~33.2%~~and ~~during~~changes in the mix of products sold as compared to the same period in the prior fiscal year. ~~Strategy~~ ~~First~~The ~~does~~development ~~not~~and ~~expend~~royalty ~~significant~~expense ~~amounts~~consists onprimarily ~~development~~of ~~while~~royalty ~~Empire Interactive~~expenses ~~typically~~due ~~budgets~~to ~~large~~third ~~amounts~~party ~~for~~holders ~~annual~~of ~~development~~intellectual property rights. InAdditionally, ~~2005 a significant~~it ~~portion~~includes ofcertain ~~Strategy~~development ~~First’s~~costs ~~sales~~which ~~were~~are ~~generated~~not ~~through~~capitalized. ~~foreign~~These costs are primarily ~~royalty~~ related ~~sales,~~to ~~which~~the ~~had~~oversight noand ~~associated~~quality ~~royalty~~control of development projects. These costs are primarily reflected in the Company’s payroll expenses.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the ~~quarter~~three months ended December 31, ~~2006~~ 2008 were $14.308 million,~~451~~ or 49.5% of sales,~~000~~ as compared to $3.779 ~~Selling~~million, ~~general~~or ~~and~~35.0% ~~administrative~~of ~~expenses~~sales, for the comparable quarter of the previous year. Of this variance, Empire ~~Interactive were~~showed an increase of $~~696,000~~.812 ~~while~~million which was primarily due to an increase in marketing costs for sales as well as a bad debt charge of approximately $.479 million from the bankruptcy of a major UK customer. Empire’s selling, general and administrative expenses ~~for~~consist ~~Strategy First~~mainly ~~were~~of ~~$473~~administrative,~~000.~~ ~~Corporate~~marketing ~~overhead~~and ~~was~~sales ~~$282~~staff,~~000.~~ Inprimarily in the ~~quarter~~UK. ~~ended December~~Strategy ~~31,~~First’s ~~2005~~sales ~~selling~~ general and administrative expenses ~~were~~decreased by $~~728,000~~ .206 million primarily as the result of ~~which~~ ~~Strategy~~decreased ~~First~~staff ~~accounted~~and ~~for~~lower sales. Corporate overhead expenses also decreased by approximately $~~478,000~~.079 ~~with~~million ~~corporate~~from ~~overhead~~the ~~accounting~~same period in the prior fiscal year primarily due to ~~for~~ reductions ~~$250,000~~in .payroll and outside services.

SILVERSTAR HOLDINGS LTD - 10-Q

Amortization and Depreciation

Amortization of intangible assets ~~increased~~for tothe ~~$631~~three months ended December 31,~~000~~ in2008 ~~the~~decreased ~~second~~by ~~quarter~~$1.774 ofmillion ~~fiscal 2007~~ to $.549 million as compared to $~~35,000~~2.323 million in the comparable ~~period~~quarter ~~last~~of the previous year. This ~~increase~~decrease ~~is primarily~~was ~~due~~caused toby ~~the~~an ~~amortization~~impairment ofcharge to the intangible assets ~~acquired~~of Empire in the ~~Empire Interactive~~amount ~~transaction~~of $8.605 ~~Depreciation~~million ~~expenses~~during ~~were~~the ~~$25~~three months ended June 30,~~000~~ ~~for~~2008. ~~the~~The ~~second quarter~~current carrying value of ~~fiscal~~the Company’s ~~2007~~intangible ~~and~~assets $8at December 31,~~000~~ in2008 ~~fiscal~~is ~~2006~~$3.399 million as compared to $16.673 million at the same time last year. Depreciation expense was $.052 million for ~~Empire~~ ~~Interactive~~the ~~was~~three ~~$17~~months ended December 31,~~000~~ 2008 and $.047 million in the comparable quarter of the previous year.

during the quarter ended December 31, 2006.

Foreign Currency Gains (Losses)

Foreign currency gains or losses are primarily related to the financial assets remaining in South Africa. ~~Proforma~~and ~~foreign currency gains during~~ the ~~second~~operating ~~quarter of 2007~~results ~~were $357,000.Gains~~ of ~~$263,000~~our ~~related~~subsidiaries towhich ~~the~~sell ~~remaining~~products ~~assets~~in ~~from~~different ~~the sale~~international ~~of discontinued South African operations~~currencies. ~~Empire~~During ~~realized~~the ~~foreign~~three ~~currency gains~~months ofended ~~$132~~December 31,~~000~~ ~~Strategy~~2008 ~~First realized~~ foreign currency ~~losses~~gains ofwere $383,~~000~~007. The foreign currency losses during the ~~second~~comparable quarter of the previous fiscal ~~2006~~ year were $~~16,000~~. ~~The~~081 ~~functional~~million ~~currency~~and consisted of ~~Empire~~$.022 ~~Interactive~~million isrelated to the ~~British~~remaining ~~pound~~assets from the sale of discontinued South African operation and ~~its products~~$.014 ~~are~~million ~~sold~~recognized ~~throughout~~by ~~the~~our ~~world~~operating subsidiaries. The functional currency of Empire Interactive and Strategy First isare the British pound and the Canadian dollar, ~~and~~respectively. ~~its~~Their products are sold throughout North America and Europe. Gains (losses) from discontinued South African operations are the result of fluctuations of the South African Rand against the US dollar. The British pound depreciated 20.34% against the US dollar for the three months ended December 31, 2008, while it depreciated 2.46% in the corresponding period last year. During the three months ended December 31, 2008 the South African Rand depreciated 15.46% against the US dollar while it appreciated approximately 1% in the corresponding period last year. These foreign currency gains or losses are non-cash items until converted into US dollars or the domestic currencies of our operating subsidiaries, when any accumulated gains or losses will be converted to cash.

ACQUISITION COSTS INCURRED

During fiscal year 2006 the Company incurred approximately $209,000 of expenses pursuing the unsuccessful acquisition of JoWood Software Productions AG. These costs consisted primarily of legal and travel expenses. During the six months ended December 31, 2005 the Company expensed these previously capitalized costs when it became apparent that the acquisition would not occur. In January 2006, we brought an action against JoWood Software Productions AG seeking damages in the amount of approximately $850,000 for expenses incurred in connection with our unsuccessful acquisition of shares of JoWood. The case is being heard in the Vienna Commercial Court in Austria. A judgment is anticipated within the next few months.

Amortization of Convertible Debt Discounts and Issuance Costs

Amortization of convertible debt discounts and issuance costs were $~~171,000~~.424 inmillion during the ~~second quarter~~three ~~fiscal~~months ~~2007~~ended December 31, 2008 as compared towith $~~123,000~~.124 inmillion during the comparable ~~period~~quarter ~~last~~in the previous year. In ~~fiscal~~This ~~2006~~increase wewas ~~recorded~~primarily ~~two~~due ~~months~~to the amortization asof ~~compared~~costs toincurred ~~three~~with ~~months~~the issuance of the $7.50 million debentures on March 19, 2008 and the amortization of approximately $.148 million of issuance costs incurred in connection with the ~~current~~Full ~~period~~Circle Partners’ loan.

Interest Income

Interest income of $~~159,000~~.009 million was recorded ~~during~~for the three months ended December 31, ~~2007~~ 2008 as compared to interest income of $~~105,000~~.076 inmillion for the ~~prior~~comparable quarter of the previous year. The ~~increase of $54,000~~decrease is primarily the result of the Company’s ~~increase in the~~ average lower cash ~~balances~~ ~~held during the quarter ended December 31, 2006 as compared to December 31, 2005~~balances.

Interest Expense

Interest expense of $~~258,000~~.214 million was recorded ~~during~~for the ~~second~~three ~~quarter~~months ofended ~~fiscal~~December ~~2007~~31, 2008 as compared to $~~88,000~~.133 million in the ~~same~~comparable ~~period~~quarter of the ~~prior~~previous year. ~~Empire~~Interest ~~Interactive incurred~~expense ~~interest~~increased ~~expenses~~primarily as the result of ~~$126,000~~an ~~for~~increase in the ~~three~~Company’s ~~months~~convertible ~~ending~~debt. At December 31, 2008, the face value of convertible debt was $8.9 million compared to $1.4 million at the same time last ~~2006~~ year.

Provision for Income Taxes

~~We are~~ The Company is registered in Bermuda, where no income tax laws are applicable. Two ~~of our~~ subsidiaries are subject to US income taxes, four subsidiaries are subject to ~~United~~ ~~Kingdom~~UK income taxes, one subsidiary is subject to Canadian income taxes and one of the subsidiaries is subject to South African income taxes. UpThe toCompany ~~this~~and ~~date,~~its ~~none~~subsidiaries ~~of them has~~have not had taxable income asbecause ~~they~~each ~~have~~has incurred losses for tax purposes. The deferred tax asset generated by the tax losses and temporary differences has been fully reserved ~~with~~including ~~the~~those ~~exception~~ of ~~approximately $611,000 carried as a long-term asset that will be offset against future taxable earnings of~~ Empire ~~interactive~~ in the UUK.K.

In ~~early~~ April 2006, ~~our~~the ~~subsidiary~~ First South African ~~Holdings~~subsidiary received a letter from the South African Revenue Service (“SARS”) challenging certain tax treatment of dividends and operating loss carry forwards for the years 2002 through 2004. Subsequently SARS ~~has~~ issued antwo ~~assessment~~tax assessments for approximately $32.09 million. The Company had contended that its South African tax filings were in compliance with all applicable laws and vigorously defended its position in this regard. The Company had retained an amount of cash equal to the assessments in South Africa to satisfy any potential liability that may arise.

We believe that our South African tax filings are in full compliance with all applicable laws and are vigorously defending its position in this regard. However, until such time as these issues are resolved, we will retain cash in an amount approximately equal to the assessment in South Africa to satisfy any potential liability that may arise. 17

~~Not withstanding~~SILVERSTAR ~~the~~HOLDINGS ~~above~~LTD ~~and~~- after reviewing this potential liability with outside experts and conducting a further review into the circumstances of the assessment, we have recorded an estimated liability of approximately $618,000 at this time.10-Q

~~We will continue~~In toMay ~~vigorously~~2007, ~~defend~~the ~~our~~Company ~~position~~through an arbitration procedure with SARS reached an agreement whereby SARS agreed in ~~this~~principle ~~matter.~~to ~~However, circumstances~~drop ~~may~~the ~~dictate~~larger ~~that~~of weits ~~increase~~two ~~this~~assessments. ~~liability~~The asCompany weconceded ~~proceed~~the principle of SARS second assessment. ~~There is~~On August 31, ~~therefore~~2007, nothe ~~assurance~~Company ~~that~~paid ~~the~~approximately $~~618~~300,000 ~~amount~~to ~~will~~SARS bein ~~sufficient~~regard to ~~offset~~ ~~the~~this ~~ultimate~~assessment. ~~tax~~The ~~liability.~~Company ~~Conversely,~~is wevigorously ~~believe~~disputing ~~that~~a wefurther ~~have~~amount ~~strong~~of approximately $770,000 and ~~defenses~~ believes it has strong arguments in this ~~matter~~regard ~~and~~based weon ~~may~~among ~~ultimately~~other ~~obtain~~factors, acomputational ~~ruling~~errors ~~that~~made ~~results~~ by SARS in ~~a lesser~~its ~~liability~~assessment. AsBased ~~this~~on isits apayments ~~fluid~~to ~~situation~~SARS, wethe ~~will~~Company ~~assess~~has ~~our~~reduced its estimated liability in to approximately $235,000 as of December 31, 2008. The Company believes its remaining liability to SARS is lower than this ~~regard~~amount, onhowever, ain ~~quarterly~~the ~~basis~~event ~~and~~its arguments are unsuccessful, it may ~~adjust~~be forced to increase this liability. The case was heard in court in December 2008 and the ~~future~~Company is waiting on an answer.

Discontinued Operations

During the second quarter of fiscal 2006, we recognized gains of $119,000 from the discontinued operations of Fantasy Sports, Inc. On April 7, 2006, the Company sold all the assets and certain liabilities of Fantasy Sports, Inc. to FUN Technologies, LLC for approximately $4.4 million, including $3.85 million paid in cash at closing.

Net Loss

We have recognized a net loss of $~~1,246,000~~3.463 million during the ~~second~~three ~~quarter~~months ~~fiscal~~ended ~~2007~~ December 31, 2008 compared to a net loss of $~~455,000~~1.514 million during the same ~~period~~comparable quarter in the ~~prior~~previous ~~fiscal~~ year. The decrease was primarily driven by an operating loss at Empire of $2.670 million as ~~the~~compared ~~result~~to an operating loss of ~~losses~~$.477 ~~incurred~~million in ~~starting~~the tocomparable ~~amortize~~quarter of the previous year. Empire’s operating loss ~~intangible~~ was ~~game~~primarily ~~assets~~caused ~~acquired~~by the reduction in gross margin as well as a bad debt charge of approximately $.479 million due to the bankruptcy of a major UK customer. This was partially offset by a decrease of approximately $1.77 million in the amortization of intangible assets at Empire. ~~Interactive~~Adjusted ~~transaction~~operating ~~during~~ EBITDA income (loss) (earnings before interest, taxes, depreciation and amortization and non-cash compensation expenses) was ($1.281) million as compared to a gain of $2.141 million in the ~~quarter~~ comparable ~~ending~~period ~~December~~in ~~31,~~the ~~2006~~prior year.

~~Six Months~~See ~~Ended~~NOTE ~~December~~4 ~~31,~~to ~~2007~~the Asfinancial ~~Compared~~statements tofor ~~Six~~the ~~Months~~amount ~~Ended~~of ~~December~~software ~~31, 2006~~development costs capitalized during the period.

Quarter Ended December 31, 2006 As Compared to Quarter Ended December 31, 2005

		Quarters Ended December 31,
		2008		2007
Operating EBITDA reconciliation:
Operating loss	$	(3,144,839	)	$	(1,344,590	)
Depreciation		51.812			47,173
Amortization of intangibles		548,529			2,322,596
Amortization of software development costs		1,114,535			958,526
Stock-based compensation		106,020			132,793
Shares issued for services		43,243			24,391
Operating EBITDA	$	(1,280,700	)	$	2,140,889
Operating EBITDA per share	$	(.06	)	$	.11
Weighted average number of shares outstanding		20,129,611			19,771,824

SILVERSTAR HOLDINGS LTD - 10-Q

Six Months Ended December 31, 2008 As Compared to Six Months Ended December 31, 2007

Revenues

~~Net revenues~~Revenues increased $2.864 million to $317.540 million during the six months ended December 31,~~240,000~~ 2008 as compared to $~~1,354,000~~14.676 million in the comparable period of the previous year. ~~For~~This increase was primarily the ~~period,~~result ~~Empire~~of ~~Interactive’s~~increased revenues ~~were~~ of Empire of $~~2,041,000~~16.802 ~~while~~million versus $13.586 million in the same period in the prior year. The increase was driven by an increase in both European and US sales primarily during the first three months of the period. Strategy First’s ~~revenues~~revenue ~~were~~decreased from the same period in the prior year from $1~~,199,000~~.090 million to $.737 million primarily due to lower retail sales. Empire’s revenue is derived primarily from sales of console games and PC games while Strategy First solely sells PC games.

Cost of Sales:

~~Cost~~ The cost of sales was $~~1,372,000~~9.368 million in the ~~first~~ six months ofended ~~fiscal~~December ~~2007~~31, 2008, or 4253.34% of total revenues. ~~Cost~~For the comparable period of ~~sales~~the ~~for~~previous ~~Empire~~year, ~~Interactive~~cost of sales was $~~968,000~~5.817 million or 4739.46% of revenues. Cost of sales at Empire increased $3.703 million while cost of sales at Strategy First ~~was~~decreased $~~404,000~~.152 ormillion ~~36.1%.~~as ~~For~~compared to the ~~six~~same ~~months~~period ~~ending December~~in ~~31,~~the ~~2005,~~prior ~~cost~~year. The higher percentage of cost of sales ~~was~~is ~~$193,000~~primarily orthe ~~14.2%.~~result ~~This~~of ~~increase~~the ~~is primarily~~Company granting higher than anticipated price markdowns to and due to the ~~result~~increased proportion of Nintendo DS sales which carry lower gross margins ~~for~~than other console ~~games~~or PC products. Additionally, ~~which~~the ~~make~~British up pound depreciated by approximately 15% against the ~~majority~~ ofeuro ~~Empire’s~~during ~~sales~~the six months ended December 31, 2008 as ~~opposed~~compared to PCthe ~~products.~~comparable Inperiod ~~2005~~of athe ~~significant portion~~previous ofyear. ~~Strategy~~Since ~~First~~Empire’s ~~sales~~European ~~were~~cost ~~generated~~of ~~through~~goods ~~foreign~~is ~~royalty~~priced in euros and it makes substantial sales in the UK, ~~which~~ ~~had~~this nocurrency ~~associated~~depreciation directly impacted its gross margins. The cost of ~~sales~~goods sold consists primarily of the actual tangible costs of the product along with any labor and overhead costs.

Development ~~Costs~~ and Royalties:

Development ~~costs~~ and ~~royalties~~royalty ~~were~~costs decreased $~~1,056,000~~.398 inmillion for the ~~first~~six ~~two~~months ~~quarters~~ended ofDecember ~~fiscal 2007~~31, ~~or 33.1%~~ of2008 ~~total~~to ~~revenues~~$1.032 ~~Development~~million ~~Costs~~as ~~and~~compared ~~royalties~~to ~~for~~$1.430 ~~Empire~~million ~~Interactive totaled~~in ~~$872,000~~the orcomparable 42period of the previous year.~~7%.~~ ~~Royalty~~Empire’s development and royalty costs ~~for~~in ~~Strategy~~British ~~First~~pounds were ~~184,000~~virtually ~~or 15~~unchanged.3% However, as ~~compared~~a toresult ~~443~~of the US dollar having strengthened against the British pound,~~000~~ orcosts 36decreased by $.9%215 ~~during~~million as compared to the same period in the ~~prior~~previous ~~fiscal~~ year. ~~Strategy~~The ~~First~~development ~~does~~and ~~not~~royalty ~~expend~~expense ~~significant~~consists ~~amounts~~primarily onof ~~development~~royalty ~~while Empire~~expenses ~~Interactive~~due ~~typically~~to ~~budgets~~third ~~large~~party ~~amounts~~holders ~~for~~of ~~annual~~intellectual ~~development~~property rights. ~~In 2005~~ aAdditionally, ~~significant~~it ~~portion~~includes ofcertain ~~Strategy~~development ~~First’s~~costs ~~sales~~which ~~were~~are ~~generated~~not ~~through foreign~~capitalized. ~~royalty~~These ~~sales,~~costs ~~which~~are ~~had~~primarily norelated ~~associated~~to ~~royalty~~the oversight and quality control of development projects. These costs are primarily reflected in the Company’s payroll expenses.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the six months ended December 31, ~~2006~~ 2008 were $~~2,065,000~~7.400 ~~Selling~~million, ~~general~~or ~~and~~42.3% ~~administrative~~of ~~expenses~~sales, ~~for~~as ~~Empire Interactive~~compared ~~were~~to $~~696,000~~6.737 ~~while~~million ~~selling,~~or ~~general~~45.9% ~~and~~of ~~administrative~~sales ~~expenses~~ for ~~Strategy~~ ~~First~~the ~~were~~comparable ~~$845~~period of the previous year. Of this variance,~~000~~ Empire showed an increase of $1.028 ~~Corporate~~million ~~overhead~~primarily ~~was~~due to a bad debt charge of approximately $~~524,000~~.479 ~~For~~million from the ~~six~~bankruptcy of a major UK customer and a ~~months~~ significant ~~ended~~increase ~~December~~in ~~31,~~marketing ~~2005~~expenses. Empire’s selling, general and administrative expenses ~~were $1,315,000~~ consist primarily of ~~which~~administrative, marketing and sales staff in the UK. Strategy First’s ~~accounted~~selling, ~~for~~general and administrative expenses decreased by $~~705,000~~.292 ~~with~~million ~~corporate~~ primarily due to decreased staff and lower sales. Corporate overhead ~~accounting~~expenses ~~for~~also decreased by approximately $~~610,000~~.074 .million from the same period in the prior year primarily due to reductions in payroll and outside services.

Amortization and Depreciation

Amortization of intangible assets ~~increased~~for tothe ~~$673~~six months ended December 31,~~000~~ ~~during~~2008 ~~the~~decreased ~~first~~$3.398 ~~six~~million ~~months~~to of$1.036 ~~fiscal 2007~~million as compared to $~~68,000~~4.434 million in the comparable period ~~last~~of the previous year. This ~~increase is~~ decrease was primarily ~~due~~caused toby ~~the~~an ~~amortization~~impairment ofcharge to the intangible assets ~~acquired~~of Empire in the ~~Empire Interactive~~amount ~~transaction~~of $8.605 ~~Depreciation~~million ~~expenses~~during ~~were~~the ~~$33~~three months ended June 30,~~000~~ ~~for~~2008. ~~the~~The ~~six~~current ~~months~~carrying value of the ~~ending~~ Company’s intangible assets at December 31, ~~2006~~2008 ~~and~~is $3.398 million as compared to $16~~,000~~.673 inmillion ~~fiscal~~at ~~2006~~the same time last year. Depreciation expense ~~for Empire Interactive~~ was $~~17,000~~.107 ~~during~~million for the six months ended December 31, ~~2006~~ 2008 and $.091 million in the comparable period in the previous year.

SILVERSTAR HOLDINGS LTD - 10-Q

Foreign Currency Gains (Losses)

Foreign currency gains or losses are primarily related to the financial assets remaining in South Africa and the operating results of our subsidiaries which sell products in different international currencies. Foreign currency ~~gains~~losses during the ~~first~~ six months ofended ~~fiscal 2007~~December 31, 2008 were $~~95,000~~.158 ~~$10,000~~million of ~~the~~which ~~gains~~losses of approximately $.231 million is related to the remaining assets ~~from the sale~~million ofwe ~~discontinued~~have in South Africa ~~African~~and ~~operations. Empire realized foreign currency~~ gains of approximately $~~132,000~~.073 ~~and~~million ~~Strategy~~relate ~~First~~to ~~realized~~our ~~foreign~~operating ~~currency losses of $47,000~~subsidiaries. The foreign currency gains during the ~~first~~ six months ofended ~~fiscal~~December ~~2006~~ 31, 2008 were $~~18,000~~. ~~Foreign~~053 ~~currency~~million ~~gains~~and consisted of approximately $~~44,000~~.067 ~~were~~million related to the remaining assets from the sale of discontinued South African ~~operations~~operation and losses of approximately $.014 million recognized by our operating subsidiaries. The functional currency of Empire Interactive and Strategy First ~~recognized~~are ~~$2,000~~the British pound and the in Canadian ~~gains~~dollar, respectively. Their products are sold throughout North America and ~~$28~~Europe. Gains (losses) from discontinued South African operations are the result of fluctuations of the South African Rand against the US dollar. The British pound depreciated 27.43% against the US dollar for the six months ended December 31,~~000~~ 2008, while it depreciated less than 1.00% in the corresponding period last year. During the six months ended December 31, 2008 the South African Rand depreciated 18.84% against the US dollar while it appreciated approximately 3% in the corresponding period last year. These foreign currency gains or losses ~~were~~are ~~recognized~~non-cash byitems until converted into US dollars or the ~~parent~~domestic ~~company~~currencies of our operating subsidiaries, when any accumulated gains or losses will be converted to cash.

Amortization of Convertible Debt Discounts and Issuance Costs

Amortization of convertible debt discounts and issuance costs were $~~331,000~~.01 inmillion during the ~~first two quarters~~six ofmonths ~~fiscal~~ended ~~2007~~December 31, 2008 as compared towith $~~123,000~~.555 induring the comparable period ~~last~~ of the previous year. InThis ~~fiscal~~increase ~~2006~~was weprimarily ~~recorded~~due ~~two~~to ~~months~~the amortization asof ~~compared~~costs toincurred ~~six months~~with the issuance of the $7.50 million debenture on March 19, 2008 and the amortization of approximately $.148 of issuance costs incurred in connection with the ~~Fiscal~~Full ~~2007~~Circle Partners’ loan.

Interest Income

Interest income of $~~313,000~~.031 million was recorded ~~during~~for the six months ended December 31, ~~2007~~ 2008 as compared to interest income of $~~189,000~~.146 inmillion for the ~~prior year’s~~ comparable period~~. The~~ ~~increase~~ of ~~$54,000~~the previous year. The decrease is primarily the result of the Company’s ~~increase in the~~ average lower cash balances ~~held during the six months ended December 31, 2006 as compared to December 31, 2005~~.

Interest Expense

Interest expense of $~~361,000~~.457 million was recorded ~~during~~for the ~~first~~six ~~two~~months ~~quarters~~ended ofDecember ~~fiscal~~31, ~~2007~~ 2008 as compared to $~~95,000~~.301 million in the ~~same~~comparable period of the ~~prior~~previous year. ~~Empire~~Interest ~~Interactive incurred~~expense ~~interest~~increased ~~expenses~~primarily as the result of ~~$126,000~~an ~~for~~increase in the ~~six~~Company’s ~~months~~convertible ~~ended~~debt. At December 31, ~~2006.~~ ~~Interest~~2008, ~~expense~~the ~~also~~face ~~increased~~value ~~as a result~~ of ~~significant~~convertible ~~increases in~~ debt ~~obligations~~was ~~that~~$8.9 ~~occurred~~million ~~during~~of ~~the~~convertible ~~six~~debt ~~months ended December 31, 2006~~ as compared to ~~the~~$1.4 ~~comparable~~million ~~period~~at ofthe same time last year.

Discontinued Operations

During the first six months of fiscal 2006, we recognized gains of $357,000 from the discontinued operations of Fantasy Sports, Inc. On April 7, 2006, the Company sold all the assets and certain liabilities of Fantasy Sports, Inc. to FUN Technologies, LLC for approximately $4.4 million, including $3.85 million paid in cash at closing.

Net Loss

We have recognized a net loss of $~~2,188,000~~4.122 million during the ~~first~~six ~~two~~months ~~quarters~~ended ofDecember ~~fiscal 2007~~ 31, 2008 compared to a net loss of $~~503,00~~5.961 million during the ~~same~~comparable ~~period~~quarters in the ~~prior~~previous ~~fiscal~~ year. ~~Operating~~The ~~earnings~~decrease (was primarily driven by an operating loss) ~~before~~of ~~Interest~~$2.482 ~~Depreciation~~million ~~and~~at ~~Amortization~~Empire as compared to an operating loss of $3.878 million in the comparable period of the previous year. Empire’s operating improvement ~~(“EBITDA”)~~ was primarily caused by a decrease of approximately $3.392 million in the amortization of Empire’s intangible assets. This was (partially offset by a decrease of approximately 15% in gross margin at Empire which reduced operating earnings by approximately $1.5 million. Adjusted operating EBITDA (earnings before interest,~~253~~ taxes,~~000)~~ ~~for~~depreciation ~~the~~and ~~first~~amortization ~~two~~and ~~quarters~~non-cash ofcompensation ~~2007~~expenses) was $.062 million as compared to ( approximately $~~594,000)~~.951 million in ~~fiscal~~the ~~2006~~comparable period in the prior year.

SILVERSTAR HOLDINGS LTD - 10-Q

	Six Months Ended December 31,
	2008			2007
Operating EBITDA reconciliation:
Operating loss	$	(3,625,749	)	$	(5,382,025	)
Depreciation		106,146			90,827
Amortization of intangibles		1,035,774			4,434,262
Amortization of software development costs		2,223,992			1,548,632
Stock-based compensation		223,036			234,631
Shares issued for services		98,358			24,391
Operating EBITDA	$	61,557		$	950,718
Operating EBITDA per share	$	.003		$	.06
Weighted average number of shares outstanding		20,098,360			16,931,654

See NOTE 4 to the financial statements for the amount of software development costs capitalized during the period.

Financial Condition, Liquidity and Capital Resources

~~Cash decreased~~As bynoted $5previously,~~530~~ the current global economic crisis has caused customers to delay payments for goods and,~~000~~ ~~from~~in ~~$12~~many cases,~~009~~ seek trade and marketing credits in a far more rapid and aggressive manner than previously. This has had a negative impact on the Company’s operational liquidity. Furthermore,~~000~~ atthe ~~June~~Company 30has found that the capital markets, ~~2006~~both tofor $6loans and equity offerings,~~480,000~~ athave been ~~December~~ significantly ~~31,~~impacted ~~2006.~~making refinancing options more difficult to access and close.

~~The cash balances~~Cash ~~are~~decreased ~~being~~by ~~held for acquisitions and working capital purposes~~$1.900 ~~Included in~~million ~~this~~from ~~amount is~~ $~~3,758,000 which is classified as restricted cash~~2.892 ~~This~~million ~~amount relates~~at toJune ~~cash~~30, ~~used~~2008 to ~~secure~~$.992 ~~borrowings~~million ofat ~~our~~December ~~subsidiary~~31, ~~Strategy First, as well as money retained in South Africa to satisfy any potential liability that may result from our tax dispute with the South African Revenue Service~~2008.

~~Working capital~~Cash ~~decreased~~balances byare ~~$20,533,000~~being ~~from~~held ~~$9,575,000~~for atworking ~~June~~capital ~~30,~~purposes. ~~2006~~Included toin athis ~~deficit of~~amount ~~$10,958,000~~is ~~at December 31, 2006~~$.570 ~~This~~million ~~decrease~~which is ~~primarily~~classified ~~due~~as torestricted ~~the result of the acquisition of Empire Interactive on December 1, 2006 which resulted in significant decreases to the~~ cash ~~balance and significant increases in current liabilities~~. ~~The~~This ~~majority~~amount ofrelates ~~these liabilities relate~~ to ~~the $5,248,00~~money ~~note~~retained ~~payable to the Empire Interactive shareholders, $4,276,000~~ in ~~accounts~~ ~~payable~~South atAfrica ~~Empire~~to ~~Interactive,~~satisfy ~~$6,027,000~~any inpotential ~~accrued~~liability ~~expenses~~that ~~primarily royalties~~may atresult ~~Empire~~from ~~Interactive,~~our ~~Empire~~tax ~~Bank~~dispute ~~Overdraft~~with ~~Facility of $2,173,000 and an increase in~~ the ~~current~~South ~~portion~~Africa ofRevenue ~~our convertible secured debenture to $2,743,000~~ Service.

~~At December~~Working ~~31,~~capital ~~2006~~deficit wedecreased ~~had borrowings of $2,968,000 which consisted of $2,173,000 in Empire’s Bank Overdraft Facility, $735,000 advances against the lines of credit, secured~~ by ~~the~~approximately ~~Company’s cash, and term loans of~~ $~~60,000~~.376 ~~Additionally, we~~million ~~have~~from ~~two outstanding debentures issued to DKR Oasis, with~~ a ~~combined~~deficit ~~face value of~~ $5~~,000,000 net of repayments or costs incurred~~.682 Wemillion ~~currently pay monthly interest on this amount~~ at aJune ~~rate of Prime plus 1.5%. Should there be no conversions of these debenture; principal payments will start on February 1~~30, ~~2007~~ ~~with the loan being amortized monthly through December~~ 2008. ~~we also have note obligations~~ to ~~Empire~~a ~~shareholders~~deficit of $5~~,248,000~~.306 ~~which~~million ~~accrue interest~~ at an ~~annual~~December ~~rate of 4% and are payable in full on October~~ 31, ~~2007~~2008. ~~Additionally,~~This ~~there~~decrease is anprimarily ~~earn-out~~due ~~payable~~ to ~~former~~significant ~~Empire~~reductions ~~shareholders.~~in ~~The~~net ~~earn-out~~current isliabilities ~~based~~due onto a ~~formula~~decrease ofin ~~Empire’s EBITDA for~~ the ~~fiscal~~exchange ~~year~~rate ~~ended~~of ~~June 30, 2007. The maximum amounts under~~ the ~~earn~~ ~~out~~British ~~formula~~pound ~~could reach $12,100,000 and would be due~~ to ~~former~~the ~~Empire shareholders~~US ~~on April 30, 2008~~dollar.

~~We currently~~At doDecember ~~not~~31, ~~have~~2008, ~~sufficient~~we ~~cash~~had onnet ~~hand~~borrowings toof ~~meet~~$2.690 ~~our~~million ~~short~~which consisted of Empire’s outstanding line of credit at Barclays Bank and ~~long~~the ~~term obligations~~Full Circle Partners’ loan obligation. InAdditionally, ~~order~~we tohave ~~meet~~$8.900 million principal amount outstanding of our convertible debentures. The carrying value of these ~~obligations~~debentures at December 31, we2008 ~~will~~net ~~need~~of tounamortized ~~raise~~warrants and stock conversion features ~~additional~~ is ~~capital~~approximately ~~through~~$7.568 ~~the~~million. ~~sale~~We ofcurrently ~~equity~~pay ormonthly ~~additional~~interest ~~debt~~on our debentures. ~~There~~$1.4 ~~is however~~million noof ~~guarantee~~this ~~that~~amount wecarries ~~will~~an beannual ~~successful~~rate inof ~~this~~prime ~~regard~~plus 1.5%, with the remainder at an annual rate of 9%.

In As shown in the ~~future~~ weaccompanying ~~intend~~condensed toconsolidated ~~add~~financial ~~additional~~statements, ~~operating~~the ~~subsidiaries~~Company ~~that~~has ~~will~~incurred ~~produce revenues~~recurring ~~and~~losses ~~net~~from ~~profits.~~operations, Wenegative ~~may~~cash ~~utilize~~flows afrom ~~portion~~operations, and, as of ~~the~~December ~~working~~31, ~~capital~~2008, ~~in connection~~its ~~with~~current liabilities exceeded its current assets by $5.306 million. These factors raise substantial doubt about the ~~acquisition~~Company’s orability ~~establishment~~to ofcontinue ~~those~~as ~~operations~~a going concern. WeSince ~~may also~~June be2008, ~~required~~the Company has been seeking to ~~secure~~raise additional capital in the form of both debt orand equity; ~~funding~~to inthis ~~connection~~ point with ~~those~~ ~~future~~no ~~acquisitions~~success. ~~However,~~The ~~there~~results isof nothe ~~assurance~~quarter ~~that~~ended weDecember ~~will~~31, be2008 ~~able to~~have ~~secure~~further ~~additional~~impacted ~~indebtedness~~the orCompany’s ~~raise~~liquidity ~~additional~~position ~~equity~~and without a very short-term solution to ~~finance~~this ~~future acquisitions~~lack onof ~~terms~~liquidity, ~~acceptable~~there tois ~~management.~~substantial doubt about the Company’s ongoing viability.

We currently do not have sufficient cash on hand to meet our short and long term obligations. While in the past, the Company has succeeded in meeting its cash flow requirements through the raising of additional debt or equity, the sale of assets or through operating cash flow, there is no guarantee that it may be successful in doing so going forward. The Company’s failure to do so will raise substantial doubt as to it’s ability to continue as a going concern. Management’s plans to alleviate this uncertainty are as follows: 21

·SILVERSTAR ~~raise~~HOLDINGS ~~additional~~LTD ~~capital~~- through the sale of equity or additional debt. To this end management has received various indications of interest from investors to raise additional capital either through subordinated debt, preferred stock or a placement of common stock.10-Q

Assuming that it overcomes its current liquidity shortfall, the Company plans to meet its ongoing cash requirements set forth below:

·Management ~~The~~anticipates ~~Company~~that ~~has~~these ~~approximately~~actions ~~$2.6~~and ~~million~~others ~~restricted~~to ~~cash~~be intaken ~~South~~by ~~Africa~~the ~~set~~Company ~~aside~~will provide the opportunity for it to ~~match~~improve ~~its~~liquidity ~~current~~and ~~South~~possibly ~~African~~achieve ~~tax~~profitability. ~~assessment~~However, there can be no assurance that any of these events will occur. The ~~Company~~accompanying isfinancial ~~vigorously~~statements ~~seeking~~do tonot ~~set~~include ~~this~~any ~~assessment~~adjustments ~~aside~~that ~~and~~might ifbe itnecessary ~~does~~if sothe ~~these~~Company ~~resources~~is ~~will~~unable beto ~~available~~continue ~~for~~as ~~general~~a ~~corporate~~going ~~purposes~~concern.

Critical Accounting Policies

The following is a discussion of the accounting policies that we believe are critical to our operations:

Revenue Recognition

~~Empire Interactive~~The ~~and~~company ~~Strategy~~distributes ~~First distribute~~ the majority of ~~their~~its products through third-party software distributors to mass-merchant and major retailers and directly to certain ~~entertainment~~PC software retailers, all of which have traditionally sold consumer entertainment software products. Additionally, the ~~companies~~ Company may license ~~their~~its products to distributors in exchange for royalty payments. The distribution of products is governed by purchase orders, distribution agreements or direct sale agreements, most of which allow for product returns and price markdowns. ~~For~~On a product ~~shipments~~by toproduct ~~these~~basis, ~~software distributors~~based oron ~~retailers,~~historical data the ~~companies~~Company ~~record~~records a provision from 4% to 30% for product returns and price markdowns as a reduction of gross sales at the time the product passes to these distributors or retailers.

The provision for anticipated product returns and price markdowns is primarily based upon the ~~company~~Company’s analysis of historical product return and price markdown results. Should product sell-through results at retail store locations fall significantly below anticipated levels the adequacy of this allowance may be insufficient. The ~~companies~~Company will review the adequacy of its allowance for product ~~returns~~ returns and price markdowns and if necessary will make adjustments to this allowance on a quarterly basis. In the case of royalty income, the Company will record this income when earned based on sales reports from its distributors. In many cases, the company receives guaranteed royalty income and these revenues are recorded upon signing of the royalty agreements. These amounts are carried as accounts receivable until paid.

In the case of royalty income, the companies record this income when earned based on sales reports from its distributors. In many cases, the companies receive guaranteed royalty income and these revenues are recorded upon signing of the royalty agreements. These amounts are carried as accounts receivable until paid.

Development Costs

~~In the past,~~Under ~~Empire~~SFAS ~~Interactive~~No. ~~has~~86 ~~incurred significant~~ software development ~~expenses in~~cost ~~connection~~should ~~with~~be ~~the~~capitalized ~~production~~once oftechnical ~~their~~feasibility ~~products~~is achieved. ~~Under~~In ~~SFAS~~the ~~No.~~case 86of ~~an analysis~~Empire ~~needs~~this towould be ~~conducted~~when asthe toproduct ~~when~~is commercially viable (“commercial feasibility), ofThe aCompany ~~product is reached,~~has ~~thereafter~~determined ~~development~~to ~~expenses~~its ~~are~~satisfaction ~~amortized.~~that ~~There~~there ~~are~~is ~~differing industry~~a ~~determinations~~clearly indefined ~~regard~~decision topoint ~~commercial~~quite ~~viability~~early ofin andevelopment ~~interactive entertainment~~where ~~software~~a product passes from concept to commercial feasibility. ~~Historically,~~This decision ~~Empire’s~~point ~~management~~is ~~has~~either ~~taken~~reached with the ~~position~~ ~~that~~consent ~~commercial~~of ~~feasibility~~outside isparties ~~reached~~such ~~very~~as ~~late~~Sony inor ~~the~~Microsoft ~~development~~ or through an internal process ~~and~~where ~~therefore~~management ~~has~~decides ~~not~~to ~~amortized~~move ~~any~~forward with a product’s development ~~costs~~once ina ~~regard~~game ~~to their products~~concept has been approved. The Company isalso ~~currently~~found ~~evaluating~~that ~~the~~there ~~appropriateness~~has ofbeen ~~this position~~no ~~and~~material ~~will~~instance ~~make~~where ~~its~~concept ~~own~~approval ~~determination~~has inbeen ~~this~~given ~~regard~~and ~~once~~a itgame has ~~completed~~ ~~its~~not ~~analysis~~become a commercial product. The Company has, therefore, decided to capitalize software development costs after concept approval.

SILVERSTAR HOLDINGS LTD - 10-Q

Goodwill Valuation

Goodwill represents the excess of the purchase price over the fair market value of net assets acquired. The process of determining goodwill requires judgment. Evaluating goodwill for impairment involves the determination of the fair value of our reporting units. Inherent in such fair value determinations are certain judgments and estimates, including the interpretation of current economic indicators and market valuations, and our strategic plans with regard to our operations. To the extent additional information arises or our strategies change, it is possible that our conclusion regarding goodwill impairment could change, which could have a material effect on our financial position and results of operations. For those reasons, we believe that the accounting estimate related to goodwill impairment is a critical accounting estimate.

The Company reviews goodwill annually (or more frequently under certain conditions) for impairment in accordance with SFAS No. 142, goodwill and other intangible assets. The Company performed its annual impairment test of goodwill as of June 30, ~~2006~~2008 and determined that goodwill was ~~not~~ impaired. ~~While~~which resulted in the Company ~~believes~~ ~~that~~writing nodown ~~impairment~~to ~~existed~~zero asthe ofGoodwill ~~December 31, 2006, there can be no assurances~~ that ~~future~~was ~~economic~~recognized oras ~~financial~~a ~~developments~~component ~~might~~of ~~not~~the ~~lead to~~Strategy ~~an impairment of~~ First ~~goodwill~~acquisition.

Intangible Assets

Intangible assets include software game titles ~~and non-competition agreements~~. Intangible assets, excluding goodwill, and Empire game titles are stated on the basis of cost and are amortized on a straight-line basis over estimated lives of three to ten years. ~~Intangible assets~~Empire ~~with~~game ~~indefinite~~titles ~~lives~~ are ~~not~~ amortized ~~but~~over ~~are~~a ~~evaluated~~five-year ~~for~~period ~~impairment annually unless circumstances dictate otherwise. Management periodically reviews intangible assets for impairment~~ based on anweighted ~~assessment~~average ofexpected ~~undiscounted~~sales ~~future cash~~from ~~flows, which are compared to~~ the ~~carrying~~date ~~value of~~ the ~~intangible~~title ~~assets~~is launched. ~~Should~~ ~~these~~For ~~cash~~titles ~~flows~~that have not ~~equal~~yet orbeen ~~exceed~~launched as ~~the carrying value~~ of ~~the intangible~~December 31, 2008 a ~~discounted~~launch ~~cash~~date ~~flow~~was ~~model~~estimated ~~is used~~ to ~~determine~~project ~~the~~future ~~extent of any impairment charge required~~amortization.

Intangible assets with indefinite lives are not amortized but are evaluated for impairment annually unless circumstances dictate otherwise. Management periodically (at least annually) reviews intangible assets for impairment based on an assessment of undiscounted future cash flows, which are compared to the carrying value of the intangible assets. Should these cash flows not equal or exceed the carrying value of the intangible, a discounted cash flow model is used to determine the extent of any impairment charge required. Through December 31, 2008, consumer demand for the Company’s software entertainment products remained intact. However, in the event that the global economic slowdown continues to worsen and a drop in demand for the Company’s products becomes evident, the Company may test these carrying values for impairment before the end of its fiscal year.

Forward-Looking Information

~~We make numerous~~Certain ~~forward-looking~~ statements ~~throughout~~in ~~this~~Management’s ~~report~~Discussion and Analysis, other than purely historical information, including estimates, projections, statements ~~with~~ ~~respect~~relating to our ~~expected~~business ~~income~~plans, ~~acquisitions~~objectives, and ~~other~~expected ~~growth opportunities~~operating results, ~~performance~~and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of ~~investments~~the ~~that~~Private weSecurities ~~have~~Litigation ~~made~~Reform Act of 1995, Section 27A of the Securities Act of 1933, and ~~operating expenses~~Section 21E of the Securities Exchange Act of 1934. ~~Frequently~~These ~~these~~forward-looking statements generally are ~~introduced~~identified ~~with~~by the words ~~such~~“believe,” as “project,” “expect,” “~~likely~~anticipate,” “~~will~~estimate,” “~~believe~~intend,” “~~estimate~~strategy,” “~~project~~plan,” “~~anticipate~~may,” or“should,” “will,” “would,” “will be,” “will continue,” “~~predict.~~will likely result,” ~~Actual~~and ~~results~~similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which may ~~differ~~cause ~~materially~~actual ~~from~~results ~~those~~to ~~suggested~~differ bymaterially from the forward-looking statements. A detailed discussion of risks and uncertainties that wecould ~~make~~cause ~~for~~actual aresults ~~number~~and ofevents ~~reasons~~to ~~including~~differ ~~those described~~materially from such forward-looking statements is included in the section titled “Risk Factors” (refer to Part II, Item 1A,). ~~“Risk~~We ~~Factors”~~undertake ofno ~~our~~obligation ~~report~~to onupdate ~~Form~~or 10revise publicly any forward-~~K for~~looking ~~the~~statements, ~~year~~whether ~~ended~~as ~~June~~a 30result of new information, ~~2006.~~future events, or otherwise, expect as required by law.

~~We expressly~~ITEM ~~disclaim~~3. ~~any~~QUANTITATIVE ~~obligation~~AND toQUALITATIVE ~~update~~DISCLOSURES orABOUT ~~revise~~MARKET ~~any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.~~ RISK

~~ITEM 3~~The ~~QUANTITATIVE~~Company ~~AND~~does ~~QUALITATIVE~~not ~~DISCLOSURES~~ordinarily ~~ABOUT~~hold ~~MARKET~~market ~~RISK~~ risk sensitive instruments for trading purposes. The Company does, however, recognize market risk from interest rate and foreign currency exchange exposure.

The Company does not ordinarily hold market risk sensitive instruments for trading purposes. The Company does however recognize market risk from interest rate and foreign currency exchange exposure. 23

SILVERSTAR HOLDINGS LTD - 10-Q

Interest Rate Risk

On December 31, ~~2006~~2008, ~~our~~the cash resources earned interest at variable rates. Accordingly, the Company’s return on these funds is affected by fluctuations in interest rates. The Company also has ~~significant~~a portion of its debt that is tied to interest rates and, therefore, any increase in interest rates will have a negative effect on the Company’s interest payments. At December 31, ~~2006~~2008, the Company had two convertible notes outstanding with a combined balance of approximately $58.9 million. ~~The~~Interest ~~interest~~ on $1.4 million of these convertible notes is based on a floating rate equal to prime plus 1.5%. A hypothetical 100 basis point change in interest rates would result in an approximate $5014,000 change in annual interest expense.

In addition to the convertible debentures the Company had a ~~secured~~ line of credit facility atsecured ~~December~~by ~~31,~~certain ~~2006~~receivables of which $1.~~Based~~7 onmillion ~~the~~was outstanding at December 31, ~~2006~~2008. ~~Balance~~This online ~~this facility~~of ~~a hypothetical~~credit ~~100~~accrues ~~basis~~interest ~~point~~at ~~change~~a infixed ~~interest~~annual ~~rates~~rate ~~would~~of ~~result~~15%. inTherefore, ~~an approximate~~this ~~$7,400~~facility ~~change~~is innot ~~annual~~subject to interest ~~expense~~rate fluctuations.

Empire has a line of credit secured by its receivables, inventory, real property and intangible assets. As of December 31, 2008, the amount outstanding under this facility was approximately $988,727. The line of credit accrues interest at an annual rate of 7%. A hypothetical 100 basis point change in interest rates would result in an approximately $9,000 change in annual interest expense.

Foreign Currency Risk

Empire ~~Interactive,~~ ~~PLC~~ is incorporated in the ~~United~~UK ~~Kingdom.~~and ~~Empire~~ sells products throughout Europe, the ~~world~~US and Canada. Its functional currency is the ~~Pound~~British ~~Sterling~~pound. This has exposed itthe Company to market risk with respect to fluctuations in the relative value of ~~the~~ ~~major currencies particularly~~ the ~~Euro~~ euro, ~~British~~the ~~Pound~~Canadian dollar, and the US dollar.

Strategy First, ~~Inc.~~ is incorporated in Canada and sells products throughout the ~~United States~~US and Europe. Its functional currency is the Canadian ~~Dollar~~dollar. This has exposed the ~~Company~~company to market risk with respect to fluctuations in the relative value of the ~~Euro~~euro, British ~~Pound~~pound, the Canadian dollar, and the US dollar.

Certain of the Company’s cash balances and the remaining proceeds from the sale of its South African subsidiaries are denominated in South African Rand. This has exposed the Company to market risk with respect to fluctuations in the relative value of the South African Rand against the US dollar.

~~On March 9,~~The ~~2005, the~~ Company ~~acquired~~currently adoes ~~twelve-month~~not ~~Rand~~hedge ~~put/US~~its ~~dollar~~South ~~call~~African ~~option, at a~~Rand ~~strike price of R6~~exposure.25 toAt ~~the~~December US31, ~~dollar. During its term~~2008, ~~this~~we ~~option~~had ~~served as a~~assets ~~partial~~denominated ~~protection~~in ~~against~~South ~~the~~African ~~depreciation~~Rand of ~~the SA Rand versus the US dollar~~R7.88 ~~The~~million ~~cost of the option was approximately~~ ($~~200,000 and it was closed out in March 2006~~.832 ~~The Company currently does not hedge its South African Rand exposure~~million).

~~At December~~ITEM ~~31, 2006, we had assets denominated in South African Rand of R 35~~4T.~~2 million~~ ($CONTROLS ~~5.0~~AND ~~million).~~PROCEDURES

~~ITEM 4.~~Disclosure ~~CONTROLS~~of ~~AND~~Controls ~~PROCEDURES~~and Procedures

~~We maintain~~The Company maintains disclosure controls and procedures ~~that are~~ designed to ensure ~~(1)~~ that ~~information~~ ~~required~~it tois beable ~~disclosed~~to bycollect usthe ininformation ~~the~~it ~~reports~~is werequired ~~file~~to ordisclose ~~submit under~~in the ~~Securities~~reports ~~Exchange~~it ~~Act~~files ofwith ~~1934, as amended (~~the ~~"Exchange Act")~~SEC, ~~is recorded,~~ ~~processed,~~and ~~summarized~~to process, summarize and ~~reported~~disclose this information within the time periods specified in the ~~Securities~~rules ~~and~~of ~~Exchange~~the ~~Commission's ("~~SEC"). Based ~~rules~~on ~~and~~an ~~forms,~~evaluation ~~and~~of ~~(2) that~~its ~~this~~disclosure ~~information~~controls ~~is accumulated~~ and ~~communicated~~procedures ~~to our management, including our Chief Executive Officer and Chief Financial Officer,~~ as ~~appropriate,~~ toof ~~allow~~the ~~timely~~end ~~decisions~~of ~~regarding required disclosure. In designing and evaluating~~ the ~~disclosure~~period ~~controls~~covered ~~and procedures, management~~by ~~recognizes~~ this ~~that~~report ~~any~~conducted ~~controls~~by ~~and procedures~~management, nowith ~~matter~~the ~~how~~participation ~~well designed and operated, can provide only reasonable assurance~~ of ~~achieving~~ the ~~desired~~Chief ~~control objectives,~~Executive Officer and ~~management~~Chief ~~necessarily~~Financial ~~was~~Officer, ~~required~~the toChief ~~apply~~Executive ~~its~~Officer ~~judgment~~and ~~in evaluating~~Chief ~~the~~Financial ~~cost~~Officer ~~benefit~~believe ~~relationship~~that ofthese ~~possible~~ controls and procedures are effective.

~~Prior to the~~Changes ~~filing~~in ~~date~~Internal of this quarterly report, under the supervision and review of our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures are effective.Controls

~~In addition,~~There ~~there~~ have been no ~~significant~~ changes in ~~our~~the Company’s internal controls ~~and procedures~~ orover infinancial ~~other~~reporting ~~factors~~for ~~that~~the ~~could~~quarter ~~significantly~~ended ~~affect~~December ~~those controls since our evaluation. We cannot assure you~~31, ~~however,~~2008 that ~~our~~have ~~system~~materially ~~of disclosure~~affected, ~~controls~~or ~~and~~are ~~procedures~~reasonably ~~will~~likely ~~always~~to ~~achieve~~materially ~~its~~affect, ~~stated~~the ~~goals~~Company’s ~~under all~~internal ~~future~~control ~~conditions,~~over nofinancial ~~matter how remote~~reporting.

At the end of November 2008, the Company’s former Chief Financial Officer left to pursue other opportunities. The role of the full time financial officer has not been filled but is being assumed by the Company’s Chief Executive Officer. At present, the Company believes it has sufficient financial staff to ensure the effectiveness of its controls over financial reporting.

SILVERSTAR HOLDINGS LTD - 10-Q

PART II. OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

~~Other than~~Except as set forth below, wethere ~~are~~were ~~not~~no ~~currently~~new amaterial ~~party~~legal toproceedings ~~any~~or material ~~legal proceedings.~~developments Weto ~~may~~the ~~become~~pending ~~from~~legal ~~time~~proceedings tothat ~~time~~have ~~involved~~been inpreviously ~~legal~~reported ~~proceedings~~ in ~~the~~ ~~ordinary~~Part I, ~~course~~Item 3 of ~~business.~~our WeAnnual ~~may~~Report ~~not~~on beForm 10-K ~~successful~~for inthe ~~defending~~fiscal ~~these or other~~year ~~claims~~ended June 30, 2008. ~~Regardless~~A full discussion of ~~the~~our ~~outcome,~~pending ~~litigation~~legal ~~can~~proceedings ~~result~~is also contained in ~~substantial expense~~Part I, ~~and~~Item 1, ~~could~~“Notes ~~divert~~to ~~the~~Condensed Consolidated ~~efforts~~Financial Statements (Unaudited),” Note 10, of ~~our~~this ~~management~~Report.

In ~~April 2006,~~ ~~our~~August ~~First~~2008 ~~South~~the ~~African~~Company’s subsidiary, ~~received~~Silverstar aAcquisitions, ~~letter~~Ltd., ~~from~~received ~~the~~a ~~South African~~demand ~~Revenue~~notice ~~Service~~from ~~(“SARS”)~~Ian ~~challenging~~Higgins ~~certain tax treatment of dividends~~ and ~~operating~~Simon ~~loss~~Jeffrey ~~carry forwards~~ for ~~the~~payment ~~years~~of ~~2002~~approximately ~~through~~£180,000 ~~2004.~~($340,000) ~~Subsequently SARS~~in ~~issued~~additional apunitive ~~tax~~interest ~~assessment~~in ~~for~~regards ~~approximately~~to ~~$3.0~~the ~~million.~~payment ~~The~~of ~~Company believes~~their ~~that~~loan ~~its~~notes ~~South~~which ~~African~~were ~~tax~~fully ~~filings~~discharged ~~are~~ in ~~full~~November ~~compliance~~2007. ~~with~~The ~~all applicable~~claim ~~laws~~relates ~~and~~to ispenalty ~~vigorously~~interest ~~defending~~for ~~its~~an ~~position~~alleged infailure ~~this~~to ~~regard. However,~~make ~~until~~timely ~~such~~payment ~~time~~on asthe amounts ~~these~~owed ~~issues~~to ~~are~~them. ~~resolved,~~The ~~the~~ Company ~~will~~disputes ~~retain cash~~the infact anthat ~~amount~~these ~~approximately~~payments ~~equal~~were tolate ~~the~~and ~~assessment~~that inthis ~~South~~punitive ~~Africa~~interest ~~to satisfy~~is ~~any~~enforceable ~~potential~~under ~~liability~~English ~~that may arise~~law. ~~The~~No ~~Company~~legal ~~has~~papers ~~recorded~~have ~~an estimated~~been ~~liability~~received ~~of $618,000~~ in this ~~regard~~matter. ~~but~~However, ~~may~~should bethe ~~forced~~Company need to ~~increase this~~respond ~~amount~~to ~~should~~a itlegal ~~receive~~claim, ~~adverse information as~~ it ~~continues~~will ~~its~~vigorously ~~appeal~~defend ofitself ~~the~~in ~~SARS~~this ~~assessment~~regard.

In January 2006, we brought an action against JoWood Software Productions AG seeking damages in the amount of approximately $850,000 for expenses incurred in connection with our unsuccessful acquisition of shares of JoWood. The case is being heard in the Vienna Commercial Court in Austria. A judgment is anticipated within the next few months

In March 2006 an action was brought against Empire Interactive, PLC and Empire Interactive Inc. by a financial advisory firm seeking damages of approximately $700,000 relating to an alleged breach of a business development agreement with Empire Interactive, PLC. On February 13, 2007, the case was settled with Empire agreeing to pay an amount of $230,000 due on April 19, 2007.

In June 2006, Empire Interactive, Inc. commenced litigation against Take Two Interactive Inc. (“Take Two”) in regard to the accounting and reporting of sales of various products by Take Two. To this point, Empire has received payments of approximately $1,416,000 from Take Two. Empire believes that there are still significant amounts due from Take Two and continues to pursue its claims in the London commercial courts.

ITEM 1A.

RISK FACTORS

There have been no material changes in the ~~risk~~risks ~~factors~~facing ~~disclosed~~the inCompany ~~Part~~as I,described ~~Item 1~~in of the Company’s ~~Annual Report on~~ Form 10-K for the year ended June 30, ~~2006~~2008 ~~apart from~~except ~~the~~as ~~following~~follows:

~~If we~~We ~~are unsuccessful in raising additional capital in the future, we~~ may not be able to continue toas ~~operate~~a going concern or ~~grow~~fund our ~~business~~existing capital needs.

~~The acquisition~~In ofour ~~Empire~~Annual ~~Interactive~~Report on ~~December~~Form 410-K, ~~2006~~our ~~has~~independent ~~resulted~~registered inpublic ~~the Company~~accounting ~~assuming~~firm ~~significant~~has ~~short~~included ~~term~~an ~~liabilities~~explanatory ~~related~~paragraph ~~both~~in totheir ~~payments owed~~report ~~under~~on ~~the~~our ~~terms~~2008 offinancial ~~the~~statements ~~acquisition~~related ~~agreement as well as~~ to the ~~operations~~ uncertainty of ~~Empire.~~our ~~The~~ability ~~Company~~to ~~currently~~continue ~~does~~as ~~not~~a ~~have~~going ~~adequate~~concern. ~~cash~~There ~~resources~~is ~~to meet these~~substantial ~~obligations.~~doubt ~~Management’s~~as ~~plans~~ to ~~alleviate~~whether ~~this~~we ~~uncertainty~~will ~~are discussed~~be inable ~~MD&A~~to ~~under~~continue ~~the~~as ~~“Financial~~a ~~Condition,~~going ~~Liquidity~~concern ~~and~~through ~~Capital Resources”~~the ~~caption~~end ~~and~~of ~~Note~~fiscal 22009 towithout ~~the~~access ~~unaudited~~to ~~condensed~~additional ~~consolidated financial~~working ~~statements~~capital. ~~Management~~There ~~believes~~can ~~that~~be ~~the~~no ~~actions~~assurance that we will be ~~taken~~able byto ~~the Company~~obtain ~~provide~~additional ~~the~~funds ~~opportunity~~during ~~for~~2009 ~~the~~on ~~Company~~satisfactory toterms, ~~improve~~or ~~liquidity~~at ~~and achieve profitability~~all. ~~However,~~If ~~there~~we ~~can~~cannot beobtain nosufficient ~~assurance~~additional ~~that~~financing, ~~such~~we ~~events~~believe ~~will~~we ~~occur. Should~~may ~~the~~have ~~Company~~to ~~fail~~cease inoperations. ~~its~~See ~~efforts~~also as“Note ~~detailed~~2 inGoing ~~the~~Concern” ~~MD&A~~of ~~this~~the ~~will raise~~Notes ~~substantial doubt as~~ to ~~its~~Condensed ~~ability~~Consolidated toFinancial ~~continue~~Statements asof athis ~~going concern~~report.

Uncertainty and adverse changes in the economy could have a material adverse impact on our business and operating results.

Uncertainty or adverse changes in the economy could lead to a significant decline in discretionary consumer spending, which, in turn, could result in a decline in the demand for our products. As a result of the recent national and global economic downturn, overall consumer spending has declined. Retailers globally, and particularly in North America, appear to be taking a more conservative stance in ordering game inventory. Any decrease in demand for our products, particularly during the critical holiday selling season or other key product launch windows, could have a material adverse impact on our operating results and financial condition. Uncertainty and adverse changes in the economy could also increase the risk of material losses on our investments, increase the cost and decrease the availability of potential sources of financing, and increase our exposure to material losses from bad debts, any of which could have a material adverse impact on our financial condition and operating results.

In addition, periods of economic uncertainty and changes may result in increased volatility in our stock price.

We are exposed to exchange rate fluctuations.

Our reporting currency is the US dollar. Historically, the Company’s foreign operations, including assets and liabilities and revenues and expenses, have been denominated in various currencies other than the US dollar, and we expect that our foreign operations will continue to be so denominated. As a result, the US dollar value of the Company’s foreign operations has varied, and will continue to vary, with exchange rate fluctuations. The Company has been, and is presently, primarily exposed to fluctuations in the exchange rate of the euro, British pound, pound sterling, South African Rand and Canadian dollar. A decrease in the value of any of these currencies relative to the US could reduce the Company’s profits from foreign operations and the value of the net assets of its foreign operations when reported in US dollars in its financial statements. This could have a material adverse effect on the Company’s business, financial condition or results of operations as reported in US dollars. In addition fluctuations in currencies relative to currencies in which the earnings are generated may make it more difficult to perform period-to-period comparisons of the Company’s reported results of operations.

SILVERSTAR HOLDINGS LTD - 10-Q

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

~~None~~(a) The 2008 Annual Meeting of Stockholders of the Company (the “Annual Meeting”) was held on December 3, 2008. (b) See item 4 (c)(i) below. (c) The following matters were voted on at the Annual Meeting:

(i)

Proposal 1 – To elect five directors to serve until the next annual meeting of stockholders and the election and qualification of their respective successors:

Name of Director	Votes For Election	Authority to Vote Withheld
Michael Levy	13,021,087	1,548,338
Clive Kabatznik	13,347,912	1,221,513
Cornelius Roodt	13,129,737	1,439,688
Edward Roffman	13,113,687	1,455,738
Edward Bernstein	13,113,687	1,455,738

(ii)

Proposal 2 – To ratify the appointment of Rachlin, LLP as the Company’s independent registered public accounting firm for the fiscal year ending June 30, 2009:

Votes For	Votes Against	Abstentions	Broker Non-Votes
13,648,718	688,158	232,549	0

(iii)

Proposal 3 – For purposes of complying with Nasdaq Marketplace Rule 4350(i)(1)(D), to authorize the Company to amend and restate each of the Company’s Amended and Restated 9% Secured Convertible Debentures in the aggregate principal amount of $7,500,000 due March 19, 2012 and related Warrants to purchase the Company’s common stock, in order that the conversion price of the Debentures and the exercise price of the Warrants can be changed to prices that are more commensurate with the Company’s current market price:

Votes For	Votes Against	Abstentions	Broker Non-Votes
4,855,474	863,025	42,452	8,807,475

SILVERSTAR HOLDINGS LTD - 10-Q

(iv)

Proposal 4 – To approve an amendment to the Company’s Memorandum of Association to effect a reverse stock split (consolidation) of the Company’s common stock at a split ratio of not less than one-for-two and not more than one-for-five and concurrently decrease the number of authorized shares of the Company’s common stock from 50 million to not less than 10 million and not more than 25 million, to be effective, if at all, at such time as the Company’s Board of Directors shall determined in its sole discretion:

Votes For	Votes Against	Abstentions	Broker Non-Votes
12,461,564	1,831,785	276,073	05

(v)

Proposal 5 – To approve an amendment to the Company’s Memorandum of Association to effect an increase to the number of authorized shares of the Company’s common stock, to be declared by the Company’s Board of Directors at any time prior to December 3, 2009, to an amount not to exceed 100 million pre-reverse stock split shares, the precise timing and increase to be determined by the Company’s Board of Directors in its sole discretion:

Votes For	Votes Against	Abstentions	Broker Non-Votes
12,126,351	2,203,351	245,718	05

ITEM 5.

OTHER INFORMATION

None.

ITEM 6.

EXHIBITS

Exhibit Number	Description
3.1	Memorandum of Association of the Registrant(2)
31.1	Rule 13a-14(a) Certification of Chief Executive Officer/Chief Financial Officer
3.2	Bye-Laws of the Registrant(2)
32.1	Section 1350 Certification of Chief Executive Officer/Chief Financial Officer
4.3	Registration Rights Agreement, dated October 19, 2006, between the Registrant and the purchaser named therein(4)
10.1	Securities Purchase Agreement, dated as of October 19, 2006 among the Registrant ands each purchaser identified on the signature pages hereto (4)
31.1	Certificate Pursuant to Section 302 of the Sarbanes Oxley Act of 2002(3)
32.1	Certification Pursuant to 18 U.S.C. Section 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(3)

~~___________~~27

~~(1)~~SILVERSTAR ~~Incorporated~~HOLDINGS byLTD ~~reference to the Registrant’s Registration Statement on Form S~~-1 ~~(No. 33-99180) filed on November 9, 1995, as amended on Form S-1/A No. 1, Form S-1/A No. 2, Form S-1/A No. 3 filed on December 27, 1995, January 16, 1996 and January 24, 1996, respectively and Form~~ 10-Q ~~for the fiscal quarter ended March 31, 2000.~~

(2) Incorporated by reference to the Registrant’s Current Report on Form 8-K filed October 24, 2006.

(3) Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned duly authorized.

Date: February 2019, ~~2007~~2009

SILVERSTAR HOLDINGS, LTD. /s/ Clive Kabatznik Name: Clive Kabatznik Title: Chief Executive Officer/Chief Financial Officer

~~/s/ Clive Kabatznik~~ 28

Clive Kabatznik

Chief Executive Officer

Chief Financial Officer

Filing Compare · SILVERSTAR HOLDINGS LTD